Last month, Major League Baseball star Rafael Devers signed a 10-year contract extension with the Boston Red Sox. Instead of taking the full amount of his salary over the course of the 10 years covered by his contract, he chose to defer receipt on almost a quarter of the total value of the contract. He will receive that deferred portion of the contract in biannual installments until the year 2043. Why make a deal like this? What factors should be taken into consideration? What are the pros and cons?
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Last month, Major League Baseball star Rafael Devers signed a 10-year contract extension with the Boston Red Sox. Instead of taking the full amount of his salary over the course of the 10 years covered by his contract, he chose to defer receipt on almost a quarter of the total value of the contract. He will receive that deferred portion of the contract in biannual installments until the year 2043.
Why make a deal like this?
What factors should be taken into consideration?
What are the pros and cons?
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- In 2018, a football player signed a contract reported to be worth $66.6 million. The contract was to be paid as $9.2 million in 2018, $10.5 million in 2019, $11.6 million in 2020, $11.7 million in 2021, $11.7 million in 2022, and $11.9 million in 2023. If the appropriate interest rate is 12 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Present valueA baseball player is offered a 5-year contract that pays him the following amounts: Year 1: $1.19 million Year 2: $1.62 million Year 3: $2.50 million Year 4: $2.51 million Year 5: $3.36 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 that has a present value of $1.80 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 12.00 percent. If the team were to agree to the player's terms, what would be the player's annual salary (in millions of dollars)? (Express answer in millions. $1,000,000 would be 1.00)a professional soccer player, is offered a 5-year contract that 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, Modrici asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Modrici wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 8 percent. If the team were to agree to Modrici’s terms, what would be Modrici’s annual salary (in millions of dollars)? The answer on this site is wrong
- a professional soccer player, is offered a 5-year contract that 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, Modrici asks his agent to negotiate a contract that has a present value of $1 million more than that which has been offered. Moreover, Modrici wants to receive his payments in the form of a 5-year annuity due. All cash flows are discounted at 8 percent. If the team were to agree to Modrici’s terms, what would be Modrici’s annual salary (in millions of dollars)?In 2021, a basketball player signed a contract reported to be worth $60.8 million. The contract was to be paid as $8.2 million in 2021, $9.7 million in 2022, $10.6 million in 2023, $10.7 million in 2024, $10.7 million in 2025, and $10.9 million in 2026. If the appropriate interest rate is 10 percent, what kind of deal did the player dunk? Assume all payments are paid at the end of the year. Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. Present valueIn 2018 a football player signed a comtract reported to be worth $98.5 million. The contract was to be paid as $14.7 million in 2018, $14.9 million in 2019, $17.1 million in 2020, $17.2 million in 2021, $17.2 million in 2022, and $17.4 million in 2023. If the appropriate interest rate is 9 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year.
- A football 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 football 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)? $1.500 $1.659 $2.439 $1.989 None of the aboveIn 2021, a basketball player signed a contract reported to be worth $52.1 million. The contract was to be paid as $6.7 million in 2021, $8.5 million in 2022, $9.1 million in 2023, $9.2 million in 2024, $9.2 million in 2025, and $9.4 million in 2026. If the appropriate interest rate is 7 percent, what kind of deal did the player dunk? Assume all payments are paid at the end of the year. Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.In March 2018, the Buffalo Bills signed Star Lotulelei to a contract reportedly worth $50 million. Lotulelei's salary (including bonuses) was to be paid as $17.1 million in 2018, $8.9 million in 2019, $7.5 million in 2020, and $8.25 million in 2021 and 2022. If the appropriate interest rate is 11 percent, what kind of deal did the defensive tackle sack? Assume all payments are paid at the end of each year. (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) Present value
- in 2018 a running back signed a contract worth $63.9 million. The contract called for $11.5 million immediately and a salary of $3.3 million in 2018, $9.1 million in 2019, $11.5 million in 2020, $9.2 million in 2021 and 2022, and $10.1 million in 2023. If the appropriate interest rate is 10 percent what kind of deal did the running back scamper off with? Assume all payments other than the first $11.5 million are paid at the end of the contract year.George’s Major League Baseball contract pays him $908287 million today, $2528930 million in 1 year, $5140446 million in 2 years and $7679387 million in 3 years. Assuming a rate of interest of 4.9% per year compounded annually, what is George’s total contract worth today?The New York Yankees signed pitcher Masahiro Tanaka to a seven-year contract. Because Mr Tanaka was under contract in Japan with the Golden Eagles, the Yankees paid them $20,000,000 to release him. Mr Tanaka's contract calls for payments of $22,000,000 per year for six years and $23,000,000 in year seven. Assuming an 8 percent discount rate and that Mr Tanaka's salary is paid annually, starting 12 months after the fee paid the Golden Eagles, the present value of the Yankees' commitment, including the fee paid to the Golden Eagles, on the signing day of the contract is $. (Round your answer to two decimal places.)