Question

In March 2015, the Kansas City Chiefs signed Jeremy Maclin to a contract worth $55 million. Maclin’s salary including roster bonus was to be paid as $3.4 Million in 2015, $12.4 million in 2016 and 2017, and $13.4 million in 2018 and 2019. If the appropriate interest rate is 11%, what kind of deal did the wide receiver snag? Assume all payments are made at the end of the year.

Answer 1

Answer:

Explanation:

PV formula=C/(1+R)^n, C- cash flow(CF) for the period, R-interest rate, n-number of period

PV of CF received in 2015= 3400000/(1+0.11)^1=3063063.06

PV of CF received in 2016= 12400000/(1+0.11)^2=10064118.17

PV of CF received in 2017=12400000/(1+0.11)^3=9066773.13

PV of CF received in 2018=13400000/(1+0.11)^4=8826995.05

PV of CF received in 2019=13400000/(1+0.11)^5=7952247.8

Net worth=NPV=[3063063.06+10064118.17+9066773.13+8826995.05+7952247.8]=38973197.21

TOTAL PV=3,897,3197.21