In 2015, the Washington Nationals baseball team signed pitcher Max Scherzer to a contract to play for the team for 7 years. He would be paid $15 million dollars per year for 14 years—an additional 7 years beyond the end of the time he would be committed to play for the Nationals. The contract was widely reported as being worth $210 million (or $15 million per year × 14 years). One baseball writer argued, though, that “this deal serves as a nice reminder that the payment terms of a deal can have an impact on the actual value of the contract.”

a. What does the writer mean by the “actual value of the contract”? Isn’t $210 million the actual value of the contract? Briefly explain.
b. The writer notes: “For a lot of reasons, money today is worth more than money in the future, and the further in the future you go, the less money is worth.” What are the reasons that money today is worth more than money in the future? Briefly explain how we calculate the value today of money we will receive in the future.
c. Assume for simplicity that Scherzer receives his salary of $15 million per year for 2018, 2019, and 2020 at the end of each calendar year. At the beginning of 2018, what is the present value of the salaries he will receive for these three years? Use an interest rate of 7% in your calculation.