In 2015, a baseball player signed a contract reported to be worth $104.3 million. The contract...
In 2015, a baseball player signed a contract reported to be worth
$104.3 million. The contract was to be paid as $15.7 million in
2015, $15.7 million in 2016, $18.1 million in 2017, $18.2 million
in 2018, $18.2 million in 2019, and $18.4 million in 2020.
If the appropriate interest rate is 11 percent, what kind of deal
did the player snag? Assume all payments are paid at the end of the
year. (Enter your answer in dollars, not millions of
dollars, e.g., 1,234,567. Do not round intermediate calculations
and round your answer to 2 decimal places, e.g.,
32.16.)
Homework Answers
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=15,700,000/1.11+15,700,000/1.11^2+18,100,000/1.11^3+18,200,000/1.11^4+18,200,000/1.11^5+18,400,000/1.11^6
which is equal to
=$72748289.63(Approx).
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