Explore BrainMass

Explore BrainMass

    Using present value to determine better pay

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5-year contract providing $4 million now and $2 million a year for 5 years. Who is better paid? The interest rate is 10%.

    Please show all work. Thanks!

    © BrainMass Inc. brainmass.com March 4, 2021, 6:22 pm ad1c9bdddf

    Solution Preview

    We need to find out the present value of both to decide.
    1. The cash flows are $3 million for 5 years. Assuming the first payment is at the end of year1 and the last payment is at the end of ...

    Solution Summary

    The solution explains how we can use the present value analysis to determine which quarterback is better paid