In 2015, a baseball player signed a contract reported to be worth $89.8 million

Question

In 2015, a baseball player signed a contract reported to be worth $89.8 million The contract was to be paid as $13.2 million in 2015, $13.7 million in 2016, $15.6 million in 2017, $15.7 million in 2018, S15.7 million in 2019, and $15.9 million in 2020. If the appropriate interest rate is 13 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year (Enter your answer in dollars, not millions ot dollars, e.g., 1,234,587. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value 59.01

Explanation / Answer

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=13.2/1.13+13.7/1.13^2+15.6/1.13^3+15.7/1.13^4+15.7/1.13^5+15.9/1.13^6

which is equal to

=$59,009,607.63(Approx).

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