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n 2015, a running back signed a contract worth $62.1 million. The contract called for $12...

n 2015, a running back signed a contract worth $62.1 million. The contract called for $12 million immediately and a salary of $2.9 million in 2015, $8.3 million in 2016, $12 million in 2017, $8.8 million in 2018 and 2019, and $9.3 million in 2020.

If the appropriate interest rate is 11 percent, what kind of deal did the running back scamper off with? Assume all payments other than the first $12 million are paid at the end of the contract 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.)

Present value            $

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Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=12+2.9/1.11+8.3/1.11^2+12/1.11^3+8.8/1.11^4+8.8/1.11^5+9.3/1.11^6

which is equal to

=$46,114,739.42(Approx).

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