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
On April 1, 2020, Vaughn Company assigns $524,600 of its accounts receivable to the Third National Bank as collateral for a $336
Stells [14]

Answer and Explanation:

The journal entry is shown below:

On April 1, 2020

Cash $315,016

Finance charge ($524,600 × 4%) $20,984  

            To Notes payable  $336,000

(Being the cash and finance charge is recorded)

Fo recording this we debited the cash and finance charge as it increased the assets and expenses and credited the note payable as it also increased the liabilities

5 0
3 years ago
Suppose you are a manager of a firm that operates in a duopoly. Recently, the state attorney general fined you and your competit
larisa86 [58]

Answer: The price level  chosen to maximize profits will be $ 6.71

Explanation:

Whenever there is price fixing between two competitors, and one of the competitor decides to choose a price level. Such competitor must ensure that the price level chosen to maximize profit does not exceed his or her competitor's marginal cost but can be  above his or her marginal cost .

Since the price fixing is $10 from previous cartel price so the best price level to maximize the profit would be less than my  rival's  price of   $ 6.72 and more than my  marginal cost of $ 6.70  which is $ 6.71

8 0
3 years ago
Boxer Industries worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job no. 403's
anzhelika [568]

Answer:

Its c

Explanation:

5 0
3 years ago
Olessa, single and age 60, sells her home for $540,000 after living there for 20 years. Her adjusted basis in that home was $220
Karo-lina-s [1.5K]

Answer:

Net gain = $60,000

Explanation:

Given:

Sale value of house = $540,000

Adjusted value = $220,000

Selling expenses = $10,000

Computation of gross profit on the house:

Gross profit on sale = Sale value of house - Adjusted value - Selling expenses

Gross profit on sale = $540,000 - $220,000 - $10,000

Gross profit on sale = $310,000

Maximum limit on gain from sale of house = $250,000(Form number 1040, Schedule D)

Computation of net gain:

Net gain = $310,000 - $250,000

Net gain = $60,000

7 0
3 years ago
David is a drug rep for a pharmaceutical company. He is in the process of prospecting at various medical offices to see who migh
xenn [34]

Answer:

determine purchase authority

Explanation:

Based on the scenario being described within the question it can be said that David was not successful because he forgot to determine purchase authority. In other words he gave the presentation to someone (the receptionist) that does not have any authority to make purchases for the company and is why he was unsuccessful. David needed to find the individual in charge of buying the pharmaceuticals for the company and give him the presentation.

4 0
3 years ago
Read 2 more answers
Other questions:
  • Accounts​ Receivable, December​ 31, 2017 $ 20,000​ (debit) Allowance for Bad​ Debts, December​ 31, 2017 prior to adjustment 600​
    13·1 answer
  • Daniel wants to find out if he can notice the difference in light intensity when he adds some lit candles to a set of lit candle
    11·1 answer
  • One of the causes of the financial crisis of 2008 was the connectedness of financial institutions, where financial assets for on
    12·1 answer
  • The distinction between operating and nonoperating income relates to: a. Continuity of income b. Reliability of measurements c.
    13·1 answer
  • Strassel Investors buys real estate, develops it, and resells it for a profit. A new property is available, and Bud Strassel, th
    11·1 answer
  • When paraphrasing or summarizing, it is not necessary to give credit to the original source if you use your own words.
    12·2 answers
  • Motor Vehicle Assembly Corporation operates a plant near the border between the United States and Mexico. Due to the location, i
    12·1 answer
  • Loanable funds refers to A. only those funds loaned from one bank to another. B. all those funds changing hands between lenders
    9·2 answers
  • ________ is the possibility that the borrower's creditworthiness is reclassified by the lender at the time of renewing credit. _
    12·1 answer
  • ABC Corporation is one of the largest energy companies in the United States, with over $50 million in publicly traded shares. Th
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!