Ican Tackel just signed a $11.5 million, 4-year contract with an NFL team. He received a signing bonus of $2 million. He will then be paid the following amounts over his 4 year contract: $1.5 at the end of year 1; $3 million at the end of year 2; $3.5 million at the end of year 3; and $1.5 million at the end of year 4. What is the present value of his contract if money can earn 8% per year?
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I calculated an answer of the present value to be $9.9 million ($2.0 million bonus received currently + $7.9 million based on the amounts spread over the 4 year contract). If you let me know if this is the correct answer, I will show you how I calculated this present value (the $9.9 million ).