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In 2018, a football player signed a contract reported to be worth $75.3 million. The contract...

In 2018, a football player signed a contract reported to be worth $75.3 million. The contract was to be paid as $10.7 million in 2018, $11.7 million in 2019, $13.1 million in 2020, $13.2 million in 2021, $13.2 million in 2022, and $13.4 million in 2023. If the appropriate interest rate is 8 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

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Answer #1

Solution :-

Present Value of Cash flows

= [ $10.7 / ( 1 + 0.08 ) ] + [ $11.7 / ( 1 + 0.08 )2 ] + [ $13.1 / ( 1 + 0.08 )3 ] + [ $13.2 / ( 1 + 0.08 )4 ] + [ $13.2 / ( 1 + 0.08 )5 ] + [ $13.4 / ( 1 + 0.08 )6 ]

= [ $10.7 * 0.926 ] + [ $11.7 * 0.857 ] + [ $13.1 * 0.794 ] + [ $13.2 * 0.735 ] + [ $13.2 * 0.681 ] + [ $13.4 * 0.6302 ]

= $9.907 + $10.031 + $10.399 + $9.702 + $8.984 + $8.444

= $57.47 millions

= $57,467,839.22

If there is any doubt please ask in comments

Thank you please rate

Therefore Present Value of Cash flows = $57,467,839.22

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