What is the present value of the given contract

Assignment Help Finance Basics

Reference no: EM132043944

Question: A baseball player just signed a contact with the Houston Astros. He will receive $3 million upfront (today) and will be receive the subsequent payments as a growing annuity starting next year (one year from today) with a growth rate (g) of 5% for the next 10 years. In other words, the first payment one year from today is 3(1xg) and so on. What is the Present Value of this contract if the interest rate is 6%, compounded annually.

Reference no: EM132043944

Questions Cloud

Find the total income statement : Pontchartrain Company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31.

Salaries of administrative personnel : Why is it important for companies like Custom Furniture Company to correctly classify and record costs such as direct materials

Introduce measurement error into the calculation : What normally does not introduce measurement error into the calculation of P/E ratios?

What would net income and return on assets : Polly Esther Dress Shops Inc. can open a new store that will do an annual sales volume of $1,220,400. It will turn over its assets 2.7 times per year.

What is the present value of the given contract : A baseball player just signed a contact with the Houston Astros. He will receive $3 million upfront (today) and will be receive the subsequent payments.

Receive the present value of the prize now : The sponsor of the prize uses a 7% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is?

What will monthly payments be : Raul and Josephine buy a plasma TV from Sparky's Electronics on an installment plan (simple interest add on loan). They will pay the TV off in 3 years

What is your estimate of the value of lit stock : Lowell Information Technology, inc (LIT) had sales of $40.2 billion in 2009. Suppose you expect its sales to grow at a rate of 10% in 2013, but then slow by 1%.

Does greater discretion in how to account for intangible : Does greater discretion in how to account for intangible non-current assets result in better quality in financial reporting?

User Account

All Pages