Textbook: Mangerial Economics Applications, Strategy, and Tatics 14th edition I

Question

Textbook: Mangerial Economics Applications, Strategy, and Tatics 14th edition

I need help with solving this Net Present Value problem with steps fully worked out formulas

ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televise Monday Night Football. What is the net present value of this investment if the parent Disnery company has an opportunity interest rate equal to its cost of capital of 9 percent. Fox and CBS agreed to pay $712 million and $622 million respectively for six years to televise Sunday afternoon NFC games. What was that worth?

Explanation / Answer

What is the net present value of this investment

=A*((1-(1+r)^(-n))/r)

=1.1*((1-(1+9%)^(-8))/9%)

=6.088 billion

What was that worth

=A*((1-(1+r)^(-n))/r)+A*((1-(1+r)^(-n))/r)

=712*((1-(1+9%)^(-6))/9%)+622*((1-(1+9%)^(-6))/9%)

=5984.22 million

the above is answer..

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