Assignment Problems –Discounted Cash Flow Valuation
1) A first round draft choice quarterback has been signed to a three year $25 million contract. The details provide for an immediate cash bonus of $2 million. The player is to receive $5 million in salary at the end of the first year ,$8 million the next, and $10 million at the end of the last year. Assuming a 15 per cent discount rate , is this package worth $25 million. If not how much is it worth?
2) You are looking into an investment that will pay you $12000 per year for the next 10 years. If you require a 15 per cent return , what is the most you would pay for this investment
3) Suppose you borrow $10,000. You are going to repay the loan by making equal annual payments for five years. The interest rate on the loan is 14 per cent per year. Prepare an amortization schedule for the loan. How much interest will you pay over the life of the loan.