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