In 2011, a running back signed a contract worth $65.8 million. The contract call

Question

In 2011, a running back signed a contract worth $65.8 million. The contract called for $10 million immediately and a salary of $4 million in 2011, $10.5 million in 2012, $10 million in 2013, $9.9 million in 2014 and 2015, and $11.5 million in 2016.

If the appropriate interest rate is 10 percent, what kind of deal did the running back scamper off with? Assume all payments other than the first $10 million are paid at the end of the year. (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

In 2011, a running back signed a contract worth $65.8 million. The contract called for $10 million immediately and a salary of $4 million in 2011, $10.5 million in 2012, $10 million in 2013, $9.9 million in 2014 and 2015, and $11.5 million in 2016.

Explanation / Answer

So PV=49.228m

Particulars 2011 2011 2012 2013 2014 2015 2016 Cash Inflow 10 4 10.5 10 9.9 9.9 11.5 PV Factor @10% 1 0.909 0.826 0.751 0.683 0.621 0.564 PV Value of the Cash Flow 10 3.636 8.678 7.513 6.762 6.147 6.491 NPV=Sum of cash flow 49.228

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