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In 2015, a baseball player signed a contract reported to be worth $110.1 million. The contract...

In 2015, a baseball player signed a contract reported to be worth $110.1 million. The contract was to be paid as $16.7 million in 2015, $16.5 million in 2016, $19.1 million in 2017, $19.2 million in 2018, $19.2 million in 2019, and $19.4 million in 2020.

If the appropriate interest rate is 13 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year.

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Answer #1
Kind of Deal- cost flow CF on calc
Statement showing Cash flows
Particulars Time PVF 13% Amount PV
Cash flows   2015                  0.8850 16,700,000.00 14,778,761.06
Cash flows 2016                  0.7831 16,500,000.00 12,921,920.28
Cash flows 2017                  0.6931 19,100,000.00 13,237,258.10
Cash flows 2018                  0.6133 19,200,000.00 11,775,719.57
Cash flows 2019                  0.5428 19,200,000.00 10,420,990.77
Cash flows 2020                  0.4803 19,400,000.00      9,318,179.43
Present value of Cash flows 72,452,829.21
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