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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
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