Sam was injured in an accident, and the insurance company has offered him the choice of $49,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity

$464,968.53

Explanation:

Calculation to determine how large must the lump sum be to leave him as well off financially as with the annuity

Using Financial calculator to find the PRESENT VALUE (PV)

N 15 years

I/YR 7.5%

PMT $49,000 per year

FV $0

Hence;

PV= $464,968.53

Therefore how large must the lump sum be to leave him as well off financially as with the annuity is $464,968.53

In July, Goldcorp had sales of $540,000. Of this, the 4% sales commission= $21,600, the shipping expenses was 1% at $5400, and the manager's monthly salary was $23,750, plus miscellaneous expenses was $15,000. So I would say that the budgeted expenses would be $21,600+$5400+$23750= $50,750, assuming that miscellaneous expenses were not budgeted. Total expenses would be $65,750 if the $15,000 was included.