Margaret Putter is a professional golfer who has just signed a $3 million contract. The terms...

Margaret Putter is a professional golfer who has just signed a $3 million contract. The terms are five annual payments of $600,000 each. Determine the present value of the contract to Margaret, assuming her interest rate is 5%.

Solutions

Expert Solution

Present value ($) = Annual payments x P/A(r%, N)

= 600,000 x P/A(5%, 5)

= 600,000 x 4.3295**

= 2,597,700

**From P/A factor table

Rahul Sunny answered 2 years ago

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