A famous quarterback just signed a $14.95 million contract providing $1.495 mill

Question

A famous quarterback just signed a $14.95 million contract providing $1.495 million a year for 10 years. A less famous receiver signed a $14.258 million 10-year contract providing $4.00 million now and $1.026 million a year for 10 years. The interest rate is 6.00%

Calculate the PV of the quarterback. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Calculate the PV of the receiver. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Who is better paid?

Calculate the PV of the quarterback. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Calculate the PV of the receiver. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Who is better paid?

Explanation / Answer

a) PV of Quarterback

= $1.495 million * 7.36008703 = $11.00 millions

b) PV of receiver

=$4.00 million + ($1.026 million * 7.36008703) = $11.55 millions

Since PV of receiver is higher than quarterback therefore receiver is better paid

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