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In 2018, a football player signed a contract reported to be worth $84 million. The contract was to be paid as $12.2 million in 2018, $12.9 million in 2019, $14.6 million in 2020, $14.7 million in 2021, $14.7 million in 2022, and $14.9 million in 2023. If the appropriate interest rate is 11 percent, what kind of deal did the player snag

Respuesta :

pedrocarratore

Answer:

$58.51 million

Explanation:

Assume that the contract was signed at the beginning of 2018 and that all payments are made at the end of their respective years. To find the present value of the contract, all payments must be "brought back" to the beginning of 2018 at a rate of 11%. The present value is:

[tex]P = \frac{12.2}{1.11}+ \frac{12.9}{1.11^2} +\frac{14.6}{1.11^3}+\frac{14.7}{1.11^4}+\frac{14.7}{1.11^5} +\frac{14.9}{1.11^6}\\P=\$58.51\ million[/tex]

The player snagged a deal with a present value of $58.51 million