Problem
You have successfully started and operated a company for the past 10 years. You have decided that it is time to sell your company and spend time on the beaches of Hawaii. A potential buyer is interested in your company, but he does not have the necessary capital to pay you a lump sum. Instead he has offered $800,000 today and annuity payments for the balance The first payment will be for $250,000 in three months. The payments will increase at 1.6% per quarter and a total of 20 quarterly payments will be made.
lf you require an EAR of 11%, how much are you being offered for your company?