Assume that Mats achieved his bonus requirements both years and he signed the contract right away on January 1, 2016. Assume that cash flows are discounted at 10.3 percent. Ignore any taxes Mats' signing bonus was paid on the day the contract was signed. His salary and bonuses, other than the signing bonus, are paid at the end of the year. What was the PV of this contract in January when Mats signed it? (Do not round intermediete caiculations. Round the answer to 2 decimal places. Omit S sign in your response.)

Assume that Mats achieved his bonus requirements both years and he signed the contract right away on January 1, 2016. Assume that cash flows are discounted at 10.3 percent. Ignore any taxes Mats' signing bonus was paid on the day the contract was signed. His salary and bonuses, other than the signing bonus, are paid at the end of the year. What was the PV of this contract in January when Mats signed it? (Do not round intermediete caiculations. Round the answer to 2 decimal places. Omit S sign in your response.)

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

See similar textbooks

Similar questions

A local newspaper headline blared, “Shawn Smith Signed for $30 Million.” A reading of the article revealed that on April 1,2009. Shawn Smith, the former record breaking center from Hockey University, signed a $30 million package with the Edmonton Ice Knights. 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 year 6). If Shawn’s interest is 8% per year, what would his contract be worth at the time he signs it?
On January 2, 2016, Jose Miguel got the franchise of Figaro, Inc.. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in four annual installments starting December 31, 2016. A present value using 12% as discount rate, the four installments would approximate P199,650. The fees once paid are not refundable. The franchise may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise fees attributed to the balance of the initial franchise fee, it would become due and demandable upon cancellation. Further, the franchisor is entitled to a 5% continuing fee on gross sales payable monthly within the first ten days of the following month. Metro Bank guaranteed the note issued by Jose Miguel. The first year of operations yielded gross sales of 9 million. On December 31, 2016, how much is the earned franchise fee? a. P950,000 b. P550,000 c. P749,650 d. P650,000
A baseball player is offered a 3-year contract which pays him the following amounts at the end of each year:Year 1: $6 millionYear 2: $8 millionYear 3: $10 millionInstead of accepting the contract, the player asks for a contract that has the team paying the same total amount, but payments are equal ($8 million a year) and come at the beginning of each year for the 3 years (3 total payments). Assuming that the appropriate discount rate is 8% per year, what is the difference in the present value of two offers?
A professional baseball player signed a 5-year contract with the last year’s World Series Champion. The contract says that the player is being paid a total compensation of $5 million in present value. The player will receive a signing bonus of $1.5 million now, and the remaining compensation will be divided equally into 5 annual salaries of $1 million each with the first salary paid a year from now. What is the implicit interest rate per year?
In 2021, a basketball player signed a contract reported to be worth $52.1 million. The contract was to be paid as $6.7 million in 2021, $8.5 million in 2022, $9.1 million in 2023, $9.2 million in 2024, $9.2 million in 2025, and $9.4 million in 2026. If the appropriate interest rate is 7 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.
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.
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?
Victor Oladipo is retiring from the NBA. Under terms defined by his professional league, Mr. Oladipo has a choice. He can receive either (a) monthly payments of $21,000 each for 20 years (240 total monthly payments) with the first monthly payment occurring precisely five years from today or (b) monthly payments of $18,425 each for 20 years (240 total monthly payments) with the first monthly payment occurring one month from today. The appropriate rate for valuing these cash flows is 2.64%/year. A creative investments firm in Carmel, IN wants to purchase the rights to this retirement package today. Victor is interested in receiving a lump sum of cash today in exchange for the retirement package. Both parties are in agreement on all information provided here. Calculate a fair price at which such an exchange could occur
Icahn Tackle just signed an $11.5 million, 4-year contract with an NFL team. He received a signing bonus of $2 million; $1.5 million at the end of year 1; $3 million at the end of year 2; $3.5 million at the end of year 3; and $1.5 million at the end of year 4. What is the present value of his contract if money can earn 4 percent per year?
A basketball player is offered the following contract today, Jan. 1, 2020: $2 million immediately, $2.40 million in 2020, $2.90 million in 2021, $3.60 million in 2022, and $3.80 million in 2023. Assume all payments other than the first $2 million are paid at the end of the year. If the appropriate discount rate is 10 percent per year, what is the present value of the deal? Please show in Excel
Landon Lowman, star quarterback of the university football team, is thinking about forgoing his last two years of eligibility and making himself available for the professional football draft. Scouts estimate that Landon could receive a signing bonus of $1.5 million today along with a five-year contract for $3 million per year (payable at the end of the year). They further estimate that he could negotiate a contract for $5.5 million per year for the remaining seven years of his career. The scout believe, however, that Landon will be a much higher draft pick if he improves by playing out his eligibility. If he stays at the university, he is expected to receive a $2.5 million signing bonus in two years along with a 5-year contract for $5 million per year. After that, the scouts expect Landon to obtain a five-year contract for $6 million per year to take him into retirement. Assume that Landon can earn a 8% return over this time. Should Landon stay or go?
Icahn Tackel just signed an $11.5 million, 4-year contract with an NFLteam. He received a signing bonus of $2 million; $1.5 million at the end ofyear 1; $3 million at the end of year 2; $3.5 million at the end of year 3; and$1.5 million at the end of year 4. What is the present value of his contract ifmoney can earn 4 percent per year?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS