In 2011, a running back signed a contract worth $67.4 million. The contract call

Question

In 2011, a running back signed a contract worth $67.4 million. The contract called for $11.5 million immediately and a salary of $3.8 million in 2011, $10.1 million in 2012, $11.5 million in 2013, $9.7 million 2014 and 2015, and $11.1 million in 2016. If the appropriate interest rate is 8 percent, what kind of deal did the running back scamper off with? Assume all payments other than the first $11.5 million 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

Cash flows PV factor Formula PV 15.3 0.926 =11.5+(3.8*0.926) 15.0188 10.1 0.857 =10.1*0.857 8.6557 11.5 0.794 =11.5*0.794 9.131 9.7 0.735 =9.7*0.735 7.1295 11.1 0.681 =11.1*0.681 7.5591 Total 47.4941

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