Contract calls-what is the value of his contract today

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Reference no: EM131831068

The Atlanta Braves signed B.J Upton to a five-year contract. The contract calls for the following cash flows:

a signing bonus of $2.00 million today,

$12.08 million in year 1,

$13.24 million in year 2,

$14.02 million in year 3,

$15.04 million in year 4, and

$16.26 million in year 5.

If Upton has a discount rate of 6.00% per year, what is the value of his contract today (in millions)? (Express answer in millions. $1,000,000 would be 1.00)

An apartment is offering an opportunity for renters to pay a year’s worth of rent in advance. Currently, rent is $884.00 per month, and is due at the first of every month. (ANNUITY DUE). The complex has offered renters the opportunity to pay $9,328.00 in advance if they pay TODAY.

What monthly interest rate would make the renter indifferent between the two options?

Reference no: EM131831068

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