Assignment task: Present value of an annuity due: You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into its systems and is offering to pay you $500,000 today, plus $500,000 at the end of each of the following six years, for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash stream that the company is offering you?
Present value of an annuity: Suppose that the networking company in problem will not start paying you until the first of the new systems that uses your software is sold in two years. What is the present value of that annuity? Assume that the appropriate interest rate is still 6 percent.