character 1 ) nicholas tse assume that he is a wealth maximizer, he will choose a girlfriend that...
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Character 1 ) Nicholas Tse
Assume that he is a wealth maximizer ,
he will choose a girlfriend that can generate the highest future income .
The rice is so soft ~
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 .
Relationship
I will choose the one who can earn mo
re $$
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 valueof her future income is :
2 million 1 ───── [ 1 − —————— ] = $12289134 10% (1+10 %)¹º
Mum , We have a happy
family again ~
Wait ~ Honey ~ Don’t forget she has a daughter !!!
Dad ~
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 love You too , Cecilia ~ because you got more money …HaHa
I win ~
Fung Fung I love You!!
We will go back to Beijing ~
Sorry , Mum
By Irene (10) & Cecilia (17)
The End