A basketball player has been offered a “$15 million contract”. He will be paid $1.5 million each year for 10 years beginning today. (A cash flow diagram is optional)
a. What is the contract worth if the player’s opportunity cost of capital is 10%.
b. How much is the contract worth if the first payment is in one year?
c. How much is the contract worth if the first payment is paid immediately but the payments are $750,00 for 20 years?