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Solve Each of the Following Independent Cases Using the Present

Question 195

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Solve each of the following independent cases using the present value tables.
The following are actual contracts signed by athletes:
a.$25,000,000 contract,payable at $2,500,000 per year for 10 years.
b.$25,000,000 contract,payable at $1,000,000 per year for 25 years.
c.$25,000,000 contract,payable at $1,562,500 per year for 16 years.
Determine the present value of each contract and indicate which contract you would prefer to have.Assume a 12% interest rate.

Correct Answer:

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a.$2,500,000 × 5.6502 = $14,12...

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