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).

Expert Solution

hi, I have provided answer in million as well as in $. let me know if you need any clarification .

contract worth = present value
present value computation

year	Cash flow	PVIF @ 10%	present value
1	$ 3.00	0.909091	$ 2.73
2	$ 2.00	0.826446	$ 1.65
3	$ 1.00	0.751315	$ 0.75
			$ 5.13

therefore value of contract =			$ 5.13	million
		OR	$ 5,131,480

jeff jeffy answered 1 year ago

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