The following problem requires present value information:
Biotech sold a patent on a new blood analyzer to Pharma.The sales agreement which was signed on January 1,2009 requires Pharma to pay Biotech $1 million immediately.In addition,Pharma is required to pay $700,000 each December 31 for 20 years starting with December 31,2009.Pharma and Biotech judge that a 10 percent is an appropriate interest rate for this arrangement.
a.Compute the present value of the receivable on Biotech's books on January 1,2009 immediately after receiving the $1 million down payment.
b.Compute the present value of the receivable on Biotech's books on December 31,2009.
c.Compute the present value of the receivable on Biotech's books on December 31,2010.
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