An All-Pro defensive lineman is in contract negotiations. The team has offered t

Question

An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure:

Time Salary

0 $ 7,200,000
1 5,800,000
2 6,300,000
3 6,800,000
4 8,200,000
5 8,900,000
6 9,700,000

All salaries are to be paid in a lump sum. The player has asked you as his agent to renegotiate the terms. He wants a $10.7 million signing bonus payable today and a contract value increase of $2,700,000. He also wants an equal salary paid every three months, with the first paycheck three months from now. If the interest rate is 6.2 percent compounded daily, what is the amount of his quarterly check? Assume 365 days in a 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.) Quarterly check amount

Explanation / Answer

Explaination

Proposed:

To arrive at yearly payments, can use PMT() function in Excel sheet using below values:

To calculate quarterly check payment, multiply the daily amount with 90days to arrive at value as $2,734,953.40 (Answer)

Offered contract Time 0 1 2 3 4 5 6 Salary 7,200,000 5,800,000 6,300,000 6,800,000 8,200,000 8,900,000 9,700,000 rate 6.20% Present value = 45,670,407 (daily compounded) NPV = 52,870,407

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