Expert Q&A; Done Part (a) It is said (S. Branch Walker) that the Indian who sold

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Expert Q&A; Done Part (a) It is said (S. Branch Walker) that the Indian who sold Manhattan for $38 was a sharp salesman. If he had put his $38 away at 6% compounded semiannually, it would now be worth over $8 billion, and he could buy most of the now-improved land back! Assume that this seller invested on January 1, 1701, the $38 he received. (Round your answers to the nearest whole dollar amount and not in millions.) Required Use Excel to determine the balance of the investment as of December 31, 2015, assuming a 6% interest rate compounded semiannually. (Hint: Use the FV function in Excel.) Use Excel to determine the balance of the investment as of December 31, 2015, assuming an annual interest rate, compounded semiannually. (Hint: Use the FV function in Excel.) 3. What would be the balances for requirements 1 and 2 if interest is quarterly? Assume that the account consisting of this invemt had a balance of S8.5 billion as of 4. December 31, 2015. How much would the total amount be on December 31, 2021, if the annual interest rate is 7%, compounded semiannually? Part (b) In 2000, a star major-league baseball player signed a 10-year, $266 million dollar contract with the Texas Rangers. Assume that equal payments would have been made each year to this individual and that the owner's cost of capital (discount rate) was 8% at the time the contract was signed. What is the present value cost of the contract to the owners as of January 1, 2000. the date the contract was signed, in each of the following independent situations? (Use Table I and Table 2.) (Round your answers to the nearest whole dollar amount and not in millions.) Required 1. The baseball player received the first payment on December 3,2000. 2 The baseball player received the first payment on January 1,2000, the date the contract was signed. Assuming the owner is in the 38% income tax bracket, calculate your answer for requirement

Explanation / Answer

Only 1 question per submission. In case of multiple part, other parts should be integral to first part.

Solution 1 Investment date 1-Jan-1701 Valuation date 31-Dec-15 Years 315 Investment 38 Interest 6% Effective interest =(((1+3%)^2)-1) 6.09% Value today =38*(1+6.09%)^315             4,647,668,681 Solution 2 Investment date 1-Jan-1701 Valuation date 31-Dec-15 Years 315 Investment 38 Interest 7% Effective interest =(((1+3.5%)^2)-1) 7.1225% Value today =38*(1+7.1225%)^315          98,220,912,870 Solution 3-A Investment date 1-Jan-1701 Valuation date 31-Dec-15 Years 315 Investment 38 Interest 6% Effective interest =(((1+6%/4)^4)-1) 6.14% Value today =38*(1+6.14%)^315             5,333,310,034 Solution 3-B Investment date 1-Jan-1701 Valuation date 31-Dec-15 Years 315 Investment 38 Interest 7% Effective interest =(((1+7%/4)^4)-1) 7.1859% Value today =38*(1+7.1859%)^315        118,345,063,539 Solution 4 Investment date 31-Dec-15 Valuation date 31-Dec-21 Years 6 Investment 8.5 billion Interest 7% Effective interest =(((1+3.5%)^2)-1) 7.1225% Value today =8.5*(1+7.1225%)^6 Value today                           12.844 Billion

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