Ami, a professional soccer player, is offered a 5-year contract that pays him the following amounts: Year 1: $1.2 million Year 2: 1.6 million Year 3: 2.0 million Year 4: 2.4 million Year 5: 2.8 million Under the terms of the agreement all payments are made at the end of each year. Instead of accepting the contract, Ami asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Ami wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 8 percent. If the team were to agree to Ami’s terms, what would be Ami's annual salary (in millions of dollars)? (Answer must have step by step explainations.)

Ami, a professional soccer player, is offered a 5-year contract that pays him the following amounts: Year 1: $1.2 million Year 2: 1.6 million Year 3: 2.0 million Year 4: 2.4 million Year 5: 2.8 million Under the terms of the agreement all payments are made at the end of each year. Instead of accepting the contract, Ami asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Ami wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 8 percent. If the team were to agree to Ami’s terms, what would be Ami's annual salary (in millions of dollars)? (Answer must have step by step explainations.)

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 49P

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Question

Ami, a professional soccer player, is offered a 5-year contract that pays him the following amounts:

Year 1: $1.2 million

Year 2: 1.6 million

Year 3: 2.0 million

Year 4: 2.4 million

Year 5: 2.8 million

Under the terms of the agreement all payments are made at the end of each year.

Instead of accepting the contract, Ami asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Ami wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 8 percent. If the team were to agree to Ami’s terms, what would be Ami's annual salary (in millions of dollars)?

(Answer must have step by step explainations.)

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