1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
gladu [14]
3 years ago
10

A famous quarterback just signed a contract for $16 mil, providing $3.6 million a year for 4 years. A less famous receiver signe

d a contract for $15.0, providing $3 mil now and $3.0 a year for 4 years. The interest rate is 9%. What are the present value of their contract?
Business
1 answer:
Damm [24]3 years ago
5 0

Answer:

The PV of the famous quarterback is $11,662,991.56, while the PV of less famous receiver is $12,719,159.63.

Explanation:

Present value (PV) refers to the valuation date value of a stream of income expected to be received in the future.

The PV for each of the two contracts can calculated by using the interest rate of 9%% (i.e. 0.12) as the discounting factor (r) to calculate the PV for each year. The discounting formula to use is (1+r)^n where n represents each relevant year. The calculations are done as follows:

1. For a famous quarterback

Step 1. Calculation of the PV for year

Year 1 PV = $3,600,000 ÷ (1.09)^1 = $3,302,752.29  

Year 2 PV = $3,600,000 ÷ (1.09)^2 =  $3,030,047.98  

Year 3 PV = $3,600,000 ÷ (1.09)^3 = $2,779,860.53

Year 4 PV = $3,600,000 ÷ (1.09)^4 = $2,550,330.76  

Step 2. Calculation of the total PV

This is obtained by adding the PVs of year 1 - 4 calculated above, and this is equal to $11,662,991.56.

2. For a less famous receiver

Step 1. Calculation of the PV for year

Year 1 PV = $3,000,000 ÷ (1.09)^1 = $2,752,293.58  

Year 2 PV = $3,000,000 ÷ (1.09)^2 =  $2,525,039.98  

Year 3 PV = $3,000,000 ÷ (1.09)^3 = $2,316,550.44  

Year 4 PV = $3,000,000 ÷ (1.09)^4 = $2,125,275.63  

Step 2. Calculation of the total PV

This is obtained by adding the PVs of year 1 - 4 calculated above, and this is equal to $9,719,159.63.

In addition, the $3,000,000 is to receive now is added to the $9,719,159.63 as follows:

PV of less famous receiver = $9,719,159.63 + $3,000,000

                                             = $12,719,159.63

Conclusion

Therefore, the PV of the famous quarterback is $11,662,991.56, while the PV of less famous receiver is $12,719,159.63.

You might be interested in
What are the two types of products that
BaLLatris [955]
C -meats and vegetables
8 0
3 years ago
On January 1, 2016, Brian's stock portfolio is worth $100,000. On September 30, 2016, $5,000 is withdrawn from the portfolio, an
defon

Answer:

1.93%

Explanation:

The time weighted rate of return will be computed by combining the return at every time period demarcated by a withdrawal/addition.

<em>Time 1: Jan 1, 2016 to Sep 30, 2016</em>

start value = 100,000; end value = (105,000+5,000) = 110,000

Return = \frac{110,000}{100,000}=1.1

<em>Time 2: Sep 30, 2016 to Sep 30, 2017</em>

start value = 105,000; end value = 108,000

Return = \frac{108,000}{105,000}=1.028571

<em>Time 3: Sep 30, 2017 to Dec 31, 2017</em>

start value = (108,000 + 3,000) = 111,000; end value = 100,000

Return = \frac{100,000}{111,000}=0.900901.

Therefore, time weighted return

= (1.1 * 1.028571 * 0.900901) - 1

= 0.019305

= 1.93%.

3 0
3 years ago
To minimize potential risks of harm, a researcher conducting an on-line survey can:
Norma-Jean [14]
To minimize potential risks of harm, a researcher conducting an on-line survey can d<span>esign the survey so that no direct or indirect identifiers are collected.
This way, there will be little or no risks of harm at all, if there is a survey that is going to eliminate any possibility of collecting either direct or indirect identifiers. Given that eradicating any such risks is the most important thing here, such surveys are a must.</span>
8 0
3 years ago
The price of ______ goods is a determinant of demand.
ryzh [129]

Generally, the price of <u>other goods</u> is an important determinant of demand for a product.

<h3>What are the determinants of demand? </h3>

The determining factor for demand level of a product includes changes in income, prices of related goods, consumer expectations, consumer tastes etc.

Therefore, the price of <u>other goods</u> is an important determinant of demand for a product.

Read more about determinants of demand

<em>brainly.com/question/23195830</em>

#SPJ1

6 0
1 year ago
A business practice associated with globalization involves business moving manufacturing and service centers to countries where
Law Incorporation [45]
Im so sure but I can help you later just give me a few minutes
3 0
2 years ago
Other questions:
  • Shanken corp. issued a 30-year, 5.9 percent semiannual bond 6 years ago. the bond currently sells for 108 percent of its face va
    8·1 answer
  • What does sfb allowed mean in real estate?
    8·1 answer
  • The 2016 financial statements of The New York Times Company reveal average shareholders’ equity attributable to controlling inte
    5·1 answer
  • In the 1970’s the Ford Motor Company sold its subcompact Pinto model with known design defects. In particular, the gas tank’s de
    8·1 answer
  • Kedia Inc. forecasts a negative free cash flow for the coming year, FCF1 = -$10 million, but it expects positive numbers thereaf
    5·1 answer
  • Question 4 (20 marks)
    6·1 answer
  • On December 31, Strike Company traded in one of its batting cages for another one that has a cost of $500,000. Strike receives a
    15·1 answer
  • Please study the case about the "Time Warner Cable" on page 467 and write an analytical and evidence based paper of minimum five
    14·1 answer
  • Budgeted material-handling costs are $50,000. The material-handling cost per wall mirror under ABC is: $2,000. $1,000.
    13·1 answer
  • Amazon is considered one of the best digital marketers and is known for establishing relationships with customers. The company t
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!