In 2012, a baseball player signed a contract reported to be worth $107.2 million

Question

In 2012, a baseball player signed a contract reported to be worth $107.2 million. The contract was to be paid as $16.2 million in 2012, $16.1 million in 2013, $18.6 million in 2014, $18.7 million in 2015, $18.7 million in 2016, and $18.9 million in 2017.

If the appropriate interest rate is 12 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year. (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

If the appropriate interest rate is 12 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year. (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Present value = (16.2/1.12^1 + 16.1/1.12^2 + 18.6/1.12^3 + 18.7/1.12^4 + 18.7/1.12^5 + 18.9/1.12^6)*1,000,000 = $ 72,608,618.21

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