could you solve this with explanation? The Atlanta Braves signed an outfielder to a five-year contract....

could you solve this with explanation?

The Atlanta Braves signed an outfielder to a five-year contract. The contract calls for the following cash flows:

a signing bonus of $2.00 million today,
$12.12 million in year 1,
$13.32 million in year 2,
$14.40 million in year 3,
$15.01 million in year 4, and
$16.01 million in year 5.

If the outfielder has a discount rate of 5.00% per year, what is the value of his contract today (in millions)? (Express answer in millions. $1,000,000 would be 1.00)

Solutions

Expert Solution

Value of Contract = -2,000,000 + 12,120,000/(1.05) + 13,320,000/(1.05)² + 14,400,000/(1.05)³ + 15,010,000/(1.05)⁴ + 16,010,000/(1.05)⁵

Value of Contract = $58,956,769.29

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Jason just signed a $6 million 3 year contract with the patriots. The contract calls for...

Jason just signed a $6 million 3 year contract with the patriots. The contract calls for a payment of $3 million 1 year from today, $2 million 2 years from today and $1 million 3 years from today, what is the contract really worth as of today if he can earn 10% apr on his money (assume annual compounding).

imagine you are a legal cannabis grower and you have signed a contract to suply as...

imagine you are a legal cannabis grower and you have signed a contract to suply as much CBC oil as is possible to a pharmaceutical company. However, your license from the Canadian government only allows you to grow 1000 plantsat a time. You thereforewish to prduce a strain of cannabis that produces more thanthe current averageof 5% CBD per gramof dry plant (some plants have higheramounts of CBD others less). Explain how you might increase CBD production in your farm...

On January 1 of year 1, Falk Company signed a contract to lease space in a...

On January 1 of year 1, Falk Company signed a contract to lease space in a building for 3 years. The lease contract calls for annual (prepaid) rental payments of $141,000 on each January 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. Present value of the three lease payments is $392,400. Required: 1. Assume the lease is accounted for as a finance lease. Prepare entries for...

Percentage-of-Completion and Completed Contract Methods Philbrick Company signed a three-year contract to provide sales training to...

Percentage-of-Completion and Completed Contract Methods Philbrick Company signed a three-year contract to provide sales training to the employees of Elliot Company. The contract price is $1,200 per employee and the estimated number of employees to be trained is 400. The expected number to be trained in each year and the expected training costs follow. Number of Employees Training Costs Incurred 2016 125 $60,000 2017 200 75,000 2018 75 40,000 Total 400 $175,000 Required For each year, compute the revenue, expense,...

Percentage-of-Completion and Completed Contract Methods Philbrick Company signed a three-year contract to provide sales training to...

You have just signed a 5-year contract with the ABB Group, a world-famous Engineering Consulting firm....

You have just signed a 5-year contract with the ABB Group, a world-famous Engineering Consulting firm. Your compensation includes a $10,000 signing bonus payable today and monthly payments of $6000 at end of the month and an additional $10,000 completion bonus at the end of year 5. Your salary and bonuses are invested in a savings account that pays 4% compounded monthly. a) What is the present value of this contract? b) You plan to put both the signing bonus...

Atlanta Tours Company entered into a five-year lease on January 1, Year 1, with Duck Boats,...

Atlanta Tours Company entered into a five-year lease on January 1, Year 1, with Duck Boats, Inc. for a customized duck boat. Duck Boats, Inc. will provide a vehicle to Atlanta Tours Company with the words "Gone with the Wind" carved into the sides. Following are the terms of the lease arrangement. •Fair value of the wagon at the inception of the lease is $10,000 •There is an eight-year estimated economic life •Estimated (unguaranteed) residual value is $3,500. Atlanta Tours...

!. A and B. You have just signed a contract to purchase your first house. The...

!. A and B. You have just signed a contract to purchase your first house. The price is $230,000 and you have applied for a $100,000, 20-year, 6.8% loan. Annual property taxes are expected to be $6,670. Hazard Insurance costs $600 per year. Your car payment is $175, with 46 months left. Your monthly gross income is $3,225. What is your monthly payment of principal and interest? You have just signed a contract to purchase your first house. The price...

On January 1, Year 1, a lessee signed a five-year equipment lease with annual payments of...

On January 1, Year 1, a lessee signed a five-year equipment lease with annual payments of $100,000 beginning December 31, Year 1. The lessee treated this transaction as a capital lease. The five lease payments have a present value of $379,000 at January 1, Year 1, based on interest of 10%. What amount should the lessee report as interest expense for the year ended December 31, Year 1?

Q1) Suppose you signed a contract for a special assignment over the next 9 years. You...

Q1) Suppose you signed a contract for a special assignment over the next 9 years. You will be paid $26,085 at the end of each year. If your required rate of return is 16.00%, what is this contract worth in today? Q2) You need a loan to purchase new equipment. The loan will be paid off over 5 years with payments made at the end of every quarter. If the stated annual rate is 23.00% and quarterly payments are $232,...

Subjects