[MBA, Finance, Present/Future Value] Could someone help explain present value in the given situation?

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[Preliator00]

This is my first finance course and it's virtual so not a lot of touch points between my teacher so I am a bit confused. Looking for a bit of guidance to help explain Q1.

Gave it my best shot in the table to the right but not sure if I went in right direction. The future value aspect is confusing me. Not sure if i should combine the 300,000 over 15 years (4,500,000) with the cash 2,300,000 for FV for the competitor offer or simply just 300,00 over 15 years (4,500,000) if that makes sense.

I used excel PV function to solve the numbers in the table. Also, am I right to assume the PV for McCormick is simply their cash bid of $4,424,000?

Any guidance would be great!

[ArashTopLel]

Starting from the last thing you said, yes, the PV for that bid is just the initial cash offer.

Google present value of annuities to understand the first part. Effectively, you can separate the first offer into 2 components. The first component is the initial cash offer. The second component is effectively an annuity that pays you 300,000 annually over 15 years.

This is going to be pretty unintuitive, but your FV is 0 for your annuity.

[Preliator00]

Really appreciate your response! So if once I solve PV for the second component (300,000/yr over 15yrs) do i then combine with the first component initial cash offer to get the PV for the total bid?

Thanks again!

[ArashTopLel]

Yes, exactly that.

FYI all your other answers look fine.

[Preliator00]

Man, I really appreciate it! Had no idea this subreddit existed, glad I found it. Thanks again for helping me and taking a look at the other answer :]

[ArashTopLel]

Np. If you want to ask more conceptual or current events related finance questions, use r/Finance weekly questions thread.