Explore BrainMass

Explore BrainMass

    Instead of accepting the contract, the baseball player asks his agent to negotiate a contract which has a present value of $1 million more than that which has been offered. Moreover, the player wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 10 percent. If the team were to agree to the player's terms, what would be the player's annual salary (in millions of dollars)?

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A baseball player is offered a 5-year contract which pays him the following amounts:

    Year 1: $1.2 million
    Year 2: $1.6 million
    Year 3: $2.0 million
    Year 4: $2.4 million
    Year 5: $2.8 million

    Under the terms of the agreement all payments are made at the end of each year.

    Instead of accepting the contract, the baseball player asks his agent to negotiate a contract which has a present value of $1 million more than that which has been offered. Moreover, the player wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 10 percent. If the team were to agree to the player's terms, what would be the player's annual salary (in millions of dollars)?

    © BrainMass Inc. brainmass.com June 3, 2020, 8:01 pm ad1c9bdddf
    https://brainmass.com/business/annuity/annuity-due-contract-negotiation-121216

    Solution Preview

    The present value of offered contract
    = ...

    Solution Summary

    Computations done by hand, step by step are examined.

    $2.19

    ADVERTISEMENT