A baseball player is offered a 5-year contract that pays him the following amounts:Year 1: $1.19 millionYear 2: $1.62 millionYear 3: $2.50 millionYear 4: $2.51 millionYear 5: $3.36 millionUnder the terms of the agreement all payments are made at the end of each year. Insteadof accepting the contract, the baseball player asks his agent to negotiate a contract thathas a present value of $1.80 million more than that which has been offered. Moreover, theplayer wants to receive his payments in the form of a 5-year ANNUITY DUE. All cash flowsare discounted at 12.00 percent. If the team were to agree to the player's terms, whatwould be the player's annual salary (in millions of dollars)? (Express answer in millions.$1,000,000 would be 1.00)

Calculation of the present value of current contract:Formula used:

Answered: A baseball player is offered a 5-year…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A football club (A) will lend (paid loan), for one year, a young striker to another club (B). The young striker, at that time, is still under contract with club A for a residual term of four years. During the term of the loan, the striker's salary would be paid 50-50 by the two clubs. If club B wanted to benefit from a purchase option after one year to obtain the final transfer of the player, what changes to the loan contract would be possible? Consider different strike prices? Make the link with elements of finance seen in class. What are the factors that would cause the option to be exercised (or not) after one year?
On December 1, 2020, Carlos entered into a lease on a building for use in his business for $1,500 per month. Under the lease terms, Carlos pays 12 months’ rent ($18,000) in advance on December 1. How much can Carlos deduct for rent in 2020? a. $18,000 b. $1,000 c. $13,000 d. $12,000
In March 2018, the Buffalo Bills signed Star Lotulelei to a contract reportedly worth $50 million. Lotulelei's salary (including bonuses) was to be paid as $17.1 million in 2018, $8.9 million in 2019, $7.5 million in 2020, and $8.25 million in 2021 and 2022. If the appropriate interest rate is 11 percent, what kind of deal did the defensive tackle sack? Assume all payments are paid at the end of each year. (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) Present value
Al paid $700 for a vehicle at Honest Bob's Cars. Al signed a $500 instalment agreement after paying $200 in cash. The complete agreement read as follows: "January 15, 2018 I commit to pay to the order of Honest Bob's Cars the sum of $500 in 10 equal payments." (signed) Al Tom accepted the instrument after Honest Bob's negotiated a fair price with him. Al wants his down payment, the first two monthly payments, and to stop making any more payments when the refrigerator stopped working after he had made two instalments. What outcome?
Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. rate of interest of 7% Prenare the leccor's inurnal entries on December 31 to record the (1) leace receivable and (2) receint of the first navment assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $450,000 at the commencement of the lease. N Note: Round your answers to the nearest whole dollar. = Nare' koung your answers in the nearest wanie nnuar Date TIDEL. SI 1) Dec. 31 2) Dec. 31 Account Name To derecognize asset and record investment in lease To record receipt of lease payment ======== Dr. Cr.
In 2021, a basketball player signed a contract reported to be worth $60.8 million. The contract was to be paid as $8.2 million in 2021, $9.7 million in 2022, $10.6 million in 2023, $10.7 million in 2024, $10.7 million in 2025, and $10.9 million in 2026. If the appropriate interest rate is 10 percent, what kind of deal did the player dunk? Assume all payments are paid at the end of the year. Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. Present value
On December 1, 2021, Carlos entered into a lease on a building for use in his business for $1,500 per month. Under the lease terms, Carlos pays 12 months' rent ($18,000) in advance on December 1. How much can Carlos deduct for rent in 2021? a.$13,000 b.$18,000 c.$1,000 d.$12,000
Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $280,000, beginning immediately. The residual value of $200,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $120,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $1,800,000 at the commencement of the lease. Note: Round your answers to the nearest whole dollar. Date 1) Dec. 31 Account Name: Dr. Cr. 0 0 0 0 0 0 0 0 To derecognize asset and record investment in lease 2) Dec. 31 0 0 00 To record receipt of lease payment
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Scupper Farms, the lessee, and Tyrrell Equipment, the lessor, sign a lease agreement on January 1, 2019, that provides for Scupper to lease a cultivator from Tyrrell. The lease terms, provisions, and other related events are as follows: The lease is noncancelable and has a term of 6 years. The annual rentals are $55,000 payable at the beginning of each year. Scupper agrees to pay all executory costs directly to a third party, which are expected to be $1,100 annually, including property taxes of $500, insurance of $350, and maintenance of $250. These costs are paid each year on November 1. The cultivator has an estimated economic life of 6 years. Scupper guarantees a residual value of $60,000 at the end of 6 years. Scupper believes it is probable that it will pay $15,000 cash as a result of this guarantee. The interest rate implicit in the lease is 14%, which is known by Scupper. Scupper’s incremental borrowing rate is 15%, and it uses the sum-of-the-years’-digits method to record…
A baseball player is offered a 5-year contract that pays him the following amounts: Year 1: $1.26 million Year 2: $1.87 million Year 3: $2.49 million Year 4: $2.54 million Year 5: $3.15 million Under the terms of the agreement all payments are made at the end of each year. Instead of accepting the contract, the baseball player asks his agent to negotiate a contract that has a present value of $1.63 million more than that which has been offered. Moreover, the player wants to receive his payments in the form of a 5-year ANNUITY DUE. All cash flows are discounted at 12.00 percent. If the team were to agree to the player's terms, what would be the player's annual salary (in millions of dollars)? (Express answer in millions. $1,000,000 would be 1.00)
On January 1, 2020, a lessee leased an office space with 2 floors, for P1,000,000 payable every January 1, starting next year. The lease term was 3 years, while the useful life of the office space was 4 years. The lessee paid P100,000 as lease bonus. The lessor also reimbursed P30,000 to the lessee. The implicit interest rate is 8% On January 1,2022, due to financial difficulties, the lessee and the lessor agreed to modify the lease as follows: - Only 1 floor will be rented. -The annual lease payments will be reduced to P400,000 -The lease term will be extended for 2 more years -The incremental borrowing rate at this date is 10% QUESTION 1: How much is the interest expense for 2021? QUESTION 2: How much is the gain or loss on partial termination as of date of modification, if any?

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