In 2012, a baseball player signed a contract reported to be worth $55 million. T
ID: 2734709 • Letter: I
Question
In 2012, a baseball player signed a contract reported to be worth $55 million. The contract was to be paid as $7.2 million in 2012, $8.9 million in 2013, $9.6 million in 2014, $9.7 million in 2015, $9.7 million in 2016, and $9.9 million in 2017. Required: If the appropriate interest rate is 8 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
The Baseball contract signed is a contract with Present value of $41,889,100 with yearly average payment of 17% of the total present contract value.
Year Contract Payment $ Discount rate 8% Present Value $ 2012 7.2m 0.926 6667200 2013 8.9m 0.857 7627300 2014 9.6m 0.794 7622400 2015 9.7m 0.735 7129500 2016 9.7m 0.681 6605700 2017 9.9m 0.630 6237000 Present Value of Yearly payments $41,889,100Related Questions
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