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Present value. Character. The rice is so soft ~. 1 ) Nicholas Tse Assume that he is a wealth maximizer , he will choose a girlfriend that can generate the highest future income. 2) Faye Wong. A divorced woman with a 6-year-old daughter ,Tong Tong.
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Character The rice is so soft ~ 1 ) Nicholas Tse Assume that he is a wealth maximizer , he will choose a girlfriend that can generate the highest future income .
2) Faye Wong A divorced woman with a 6-year-old daughter ,Tong Tong. Her annual income will be 2 million per year
3) Cecilia Cheung Famous Single- singer, as she is less famous now , her annual income will be 1 million per year .
I will choose the one who can earn more $$ Relationship
Assume that Nicholas will choose the one who will generate more future income ,and he will be with the girl for 10 years . Now ,we discount the future income of Cecilia and Faye into present value first .Interest rate :10% /year
Present value of receiving a constant amount at the end of each year for finite number of years . Y Y Y Y ————+ ——— + ——— + ……… ——— (1+r)¹ (1+r)² (1+r)³ (1+r)ⁿ Y 1 = ———[ 1 ― ————] r(1+r)ⁿ * n = time (number of year)
Cecilia will earn 1 million per year , and she will work for 10 years. So the present value of her future income is : 1 million 1 ——————[ 1 ─ ——————] = $6144567 10% (1+10 %)¹º
Faye Wong will earn 2 million per year ,and she will work for 10 years. So the present value of her future income is : 2 million 1 ───── [ 1 −——————] = $12289134 10% (1+10 %)¹º
Mum , We have a happy family again ~
But there is a point that Faye has a daughter, Tong Tong and she will spend Faye’s income. • Tong Tong will spend $ 1200000 per year , and she will spend Faye’s income for 10 years.
So , as Tong Tong will spend $1200000 /year ,the present value of Faye´s future income will decrease 2 million 1 ───── [ 1 ─ ───── ] - Tong Tong’s expenditure 10% (1+10 %)¹º 2 million 1 $1200 000 1 = ───── [ 1 − ────── ] − ────── [ 1 − ───── ] 10% (1+10 %)¹º 10% (1+10 %)¹º =$12289134 −$7373480 =$ 4915654
And Cecilia’s future income ( in terms of present value) remains constant = $6144567 But Faye’s future income( in terms of present value ) decreases =$ 4915654 So Nicholas will choose Cecilia now ~
I win ~ Fung Fung I love You!! I love You too , Cecilia ~because you got more money …HaHa
We will go back to Beijing ~ Sorry , Mum
The End By Irene (10) & Cecilia (17)