Present Value
The director of marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose from the following: a 15-year sponsorship paying $100,000 per year, a 15-year sponsorship initially paying $75,000 per year and increasing 5% each year, and a 15-year sponsorship initially paying $45,000 per year but increasing 12% each year.
Case Questions
- Determine the present value of each year’s payment for each proposal, as well as the total present value of each proposal. For each proposal, compute two different outcomes, one with a discount rate of 5% and one with a discount rate of 10%.
