Based on the amount that your friend will be paid every quarter and the amount he will receive at the end of 6 years, the minimum amount he should take is $889,616.
<h3>What amount is the minimum your friend should accept?</h3>
The amount your friend will receive is constant so this is an annuity. It is an annuity due because it comes at the start of the period.
The minimum amount your friend should take is:
= Present value of annuity due + Present value of end of 6 year payment
The period is: The rate is:
= 6 years x 4 quarters = 8% / 4 quarters
= 24 quarters = 2% per quarter
The minimum amount is:
= (Annuity x Present value of Annuity Due interest factor, 2%, 24 periods) + (500,000 x Present value factor, 2%, 24 periods)
= (30,000 x 19.2922) + (500,000 x 0.6217)
= $889,616
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