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Using present value to determine better pay

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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%.

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Solution Summary

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

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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 ...

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