A famous quarterback just signed a contract for $14 million, providing $2.6 mill

Question

A famous quarterback just signed a contract for $14 million, providing $2.6 million a year for 4 years. A less famous receiver signed a contract for $13.0 million, providing $3 million now and $2.5 million a year for 4 years. The interest rate is 8%. a. What is the PV of the quarterback's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the PV of the receiver's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. Who is better paid? Quarterback Receiver

Explanation / Answer

In quarter back contract didnt mention the intial cashflow.

I am calculatiing that as = 14 - 4*2.6 = 3.6

PV of quarterback = 3.6 + 2.6 / (1 + 8%) + 2.6 / (1 + 8%)2 + 2.6 / (1 + 8%)3 + 2.6 / (1 + 8%)4 = 12.21 million

PV of receiver = 3 + 2.5 / (1 + 8%) + 2.5 / (1 + 8%)2 + 2.5 / (1 + 8%)3 + 2.5 / (1 + 8%)4 = 11.28 million

Quarterback got paid better

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