Suppose you are the agent for an NFL quarterback. Suppose the quarterback isoffered the following contract by the Falcons: a signed bonus of $10,000,000 (to bereceived immediately), a first year's salary of $10,000,000 (to be received one yearfrom today), a second year's salary of $15,000,000 (to be received two years fromtoday), and a third year's salary of $20,000,000 (to be received three years fromtoday). Assuming the discount rate is 10%, what is the present value of the contract?Use the following to answer this question:$65,770,000.00$46,513,899.32$42,285,363.02$45,604,808.41

To find the present value of the contract, we need to discount each of the future payments back to…

Answered: Suppose you are the agent for an NFL…

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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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
In 2018 a football player signed a comtract reported to be worth $98.5 million. The contract was to be paid as $14.7 million in 2018, $14.9 million in 2019, $17.1 million in 2020, $17.2 million in 2021, $17.2 million in 2022, and $17.4 million in 2023. If the appropriate interest rate is 9 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year.
in 2018 a running back signed a contract worth $63.9 million. The contract called for $11.5 million immediately and a salary of $3.3 million in 2018, $9.1 million in 2019, $11.5 million in 2020, $9.2 million in 2021 and 2022, and $10.1 million in 2023. If the appropriate interest rate is 10 percent what kind of deal did the running back scamper off with? Assume all payments other than the first $11.5 million are paid at the end of the contract year.
A football player is offered a 5-year contract which 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, the football player asks his agent to negotiate a contract which has a present value of $1 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 10 percent. If the team were to agree to the player's terms, what would be the player's annual salary (in millions of dollars)? $1.500 $1.659 $2.439 $1.989 None of the above
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
A baseball player is offered a 5-year contract that pays him the following amounts: Year 1: $1.19 million Year 2: $1.62 million Year 3: $2.50 million Year 4: $2.51 million Year 5: $3.36 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 $1.80 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)
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, Modrici asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Modrici 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 Modrici’s terms, what would be Modrici’s annual salary (in millions of dollars)? The answer on this site is wrong
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, Modrici asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Modrici 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 Modrici’s terms, what would be Modrici’s annual salary (in millions of dollars)?
Last month, Major League Baseball star Rafael Devers signed a 10-year contract extension with the Boston Red Sox. Instead of taking the full amount of his salary over the course of the 10 years covered by his contract, he chose to defer receipt on almost a quarter of the total value of the contract. He will receive that deferred portion of the contract in biannual installments until the year 2043. Why make a deal like this? What factors should be taken into consideration? What are the pros and cons?
The New York Yankees signed pitcher Masahiro Tanaka to a seven-year contract. Because Mr Tanaka was under contract in Japan with the Golden Eagles, the Yankees paid them $20,000,000 to release him. Mr Tanaka's contract calls for payments of $22,000,000 per year for six years and $23,000,000 in year seven. Assuming an 8 percent discount rate and that Mr Tanaka's salary is paid annually, starting 12 months after the fee paid the Golden Eagles, the present value of the Yankees' commitment, including the fee paid to the Golden Eagles, on the signing day of the contract is $. (Round your answer to two decimal places.)
A local newspaper headline blared, "Bo Smith Signs for $30 Million." The article revealed that, on April 1, 2002, Bo Smith, the former record- breaking running back from Football University, signed a $30 million package with the Nebraska Lions. The terms of the contract were $3 million immediately, $2.4 million per year for the first five years (with the first payment after one year), and $3 million per year for the next five years (with the first payment at the end of year six). If the interest rate is 8% compounded annually, what is Bo's contract worth at the time of contract signing?
Company XYZ has hired you as a consultant. It has suggested two options to pay for your services: Option A: An initial payment of 100,000AED on signing the contract, 200,000AED end of the second year and 100,000 at end of the third year. Option B: An initial payment of 100,000AED on signing the contract, 150,000AED end of the first year, and 140, 000AED end of the second year. Which payment plan should you accept if the market interest rate is 10%? Briefly explain your choice.

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