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In 2000, the New York Mets owed their player Bobbie Bonilla a remaining $5.9 million on his contract. Instead of paying the cash up-front, the
In 2000, the New York Mets owed their player Bobbie Bonilla a remaining $5.9 million on his contract. Instead of paying the cash up-front, the team agreed to give Bonilla $1.19 million per year for 25 years, a total of $29.75 million. But the payments were deferred, only starting in 2011, eleven years later. What was the present value as of 2000, of this renegotiated contract, if the appropriate discount rate was 8%? Did Mr. Bonilla get a good deal? Please show your calculations. What financial accounting formula would you need to use?
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