what is the present value of the current contract, and which contract should Hospital XYZ choose?

Time Value of Money

Hospital XYZ currently has a contract with an HMO that agrees to pay it $5,000,000 at the end of each of the next five years. The hospital has the ability to opt out now to renegotiate, and the new deal has a predicted present value of $21,500,000. Assuming the hospital has a discount rate of 7 percent and the deals differ only in payment structure, what is the present value of the current contract, and which contract should Hospital XYZ choose?

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