Hey Chegg, I need help with this question for Corporate Finance. Please show me
ID: 2729400 • Letter: H
Question
Hey Chegg, I need help with this question for Corporate Finance. Please show me how you arrive at the answer by showing your work (step by step). The more detailed the work shown, the better for me. It would help me to understand it more clearly and follow it better. I know it is asking a lot, but it is important because I need it for an assignment. Thank you.
We win a judgement of $200,000 now for pain and suffering. The defendant will have to pay us next year. Additionally, he will have to pay us our salaries for 5 years. The salary 2 years ago was $100,000. The increase is 4% yearly. We deserve 3 more salaries for the next 3 years. Derive the payment he will have to give us next year, if the discount rate is 5%. Assume all data occur at the end of the year.
Explanation / Answer
Teh salary is 100,000 2 years ago and it increases 4% annualy so after three years we receive third payment and it is
100,000*(1+$%)^3
=$112,486.4