$252 million) He later moved to the Yankees, but assume the following in order to determine the value of his contract when he signed it Rodriguez ears $16 million in the first year, S17 million in years 2 through 4 519 million in years 5 and 6, 523 million in year 7 and 527 million in years 8 through 10 He also receives his $10 million signing bonus spread equally over the first 5 years ($2 million per year) His deferred payments begin in 2011 The deferred payment amounts total $33 million and are 55 million then $4 million then eight amounts of $3 million (ending in 2020). However, the actual payouts will be different. All of the deleted payments will earn 3% per year until they are paid. For example, the 55 million is deferred from 2001 to 2011 or 10 years, meaning that it will actually be $6.7196 milion when paid. Assume that the S4 million payment deferred to 2012 is deferred from 2002 (each payment is deferred 10 years) The contract is a 10-year contract, but each year has a deferred component so that cash flows are paid out over a total of 20 years. The contractual payments signing bonus, and deferred components are given below. Note that by contract the deferred components are not paid in the year they are cared, but instead are paid (plus interest) 10 years later 2001 316 M OM 2002 $17M 2003 SYM M 2004 $17M M 2005 $19 M CM 2006 519 M 2007 $20 M 2008 527M 2009 527 M 2010 0 years later 2001 $16 M $2 M 2011 Deferred S5M 2002 $17M $2M 2012 2003 $17M $2M 2013 2004 $17M S2M 2014 2005 $19 M $2M 2015 2006 $19 M 2007 S23 M 2008 $27M 2009 $27M 2010 $27M 2016 2017 2018 2019 2020 $4M S3 M $3 M S3 M $3M 53M S3M S3 M S3M Assume that an appropriate discount rate for A-Rod to apply to the contract payments is 75 per year a. Calculate the true promised payments under this contract, including the deferred payments with interest b. Draw a timeline of all of the payments c. Calculate the present value of the contract d. Compare the present value of the contract to the quoted value of $252 million What explains the difference? The true promised payments under this contract for years 1 through 5 are: (Round all values to the nearest integer) Year 1.3 Year 25 Year 3: Year 4 SI million million million million Year 25 Year 3 S Year 4.5 Year 5 s million million million million