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sleet_krkn [62]
3 years ago
12

Consider an offer to supply 5 paintings per year to an art gallery in Rome for the next five years. The contract is exclusive, m

eaning that, if you accept it, you cannot sell paintings to other galleries or other clients. The contract also offers a signing bonus of $100,000. If you were to refuse the contract, you estimate that you would be selling 7 paintings a year, at a price of $45,000 each, for the next 5 years. Assume that your required rate of return is 20%. What is the minimum price per painting (assume the same price for each painting) at which you are willing to accept the contract
Business
1 answer:
IceJOKER [234]3 years ago
3 0

Answer:

I will accept the offer if the price per painting is $56,312.41 or higher.

Explanation:

We will calculate the present value of the other option which is, selling our painting as a freelancer.

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 315,000.00

time 5

rate 0.2

315000 \times \frac{1-(1+0.2)^{-5} }{0.2} = PV\\

PV $942,042.8241

Now, we subtract the signing bonus of 100,000

942,042.83 - 100,000 = 842,042.83

And solve for the annual proceeds from the painting we need to equalize the opportunity cost:

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 842,042.83

time 5

rate 0.2

842042.83 \div \frac{1-(1+0.2)^{-5} }{0.2} = C\\

C  $ 281,562.03

Now, we divide by the 5 painting per year:

$281,562.03 per year / 5 painting per year = $56,312.41

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The firms employing such structure believes that employees are the most important resource and without their satisfaction operational effectiveness and stability cannot be achieved.

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Four strategies for ___________________________________are avoid, control, transfer, or retain.
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2 years ago
The Weston Candy Company is known for its inexpensive chocolates. To appeal to a more upscale market, it introduces a new line o
NARA [144]

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When the economy is in short-run equilibrium, Group of answer choices there are increases in inventory. people want to buy more
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Answer:

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