Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $54,000 per year for the next 13 years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
a. If Mr. Moore’s opportunity cost (potential return) is 11 percent, what is the present value of his consulting contract?
Assuming Mr. Moore will not retire for two more years and will not start to receive his 13 payments until the end of the third year, what would be the value of his deferred annuity?