Question: Mr. Flint retired as president of the Color Tile Company but is currently on a consulting contract for $45,000 per year for the next 10 years.
a. If Mr. Flint's opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?
b. Assuming that Mr. Flint will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity?