Question

"A professional baseball player signs a contract that will pay a total of $124 million to play for 10 years. Instead of receiving $12.4 million in each year, the player and team $18.6 million annually in years 1-4 $6.2 million annually in years 5-9 $2.33 million annually in years 10-17 Assume the team can earn a 4% interest rate. How much does the team need to deposit now in the account in order t tulrfund ihe players contra verte entire 17 years? Enter your answer in terms of millions of dollars. For example, if the answer is $12.3 million, enter 12.3. arranges the following payment structure: inord" to flyfund the players contract over the entire

Answer 1

Rate of interest 4%

Payment Structure	Present Worth of the payment structure now
$18.6 million in year 1 – 4	PW = $18.6 million (P/A, 4%, 4) PW = $18.6 million (3.6299) = 67.52 million	67.52 million
$6.2 million in year 5 – 9	PW = $6.2 million (P/A, 4%, 5)(P/F, 4%, 4) PW = $6.2 million (4.4518)( 0.8548) = 23.59 million	23.59 million
$2.33 million in year 10 – 17	PW = $2.33 million (P/A, 4%, 8)(P/F, 4%, 9) PW = $2.33 million (6.7327)( 0.7026) = 11.02 million	11.02 million
The team need to deposit now in order to fully fund the player’s contract		102.13 million

The team needs to deposit now in order to fully fund the player’s contract is 102.13