Question
Poor Alex Rodriguez! The newspapers claim that he is making $5.7 million a year. He claims that this is not true in a present value
Poor Alex Rodriguez! The newspapers claim that he is making $5.7 million a year. He claims that this is not true in a present value sense and that he will really be making the following amounts for the next 5 years: Year | Amount 0 (now) | $ 5.5 million (Sign up Bonus) 1 | $ 4 million 2 | $ 4 million 3 | $ 4 million 4 | $ 4 million 5 | $ 7 million
If you wanted to raise the nominal value of his contract to $30 million, while preserving the present value, how would you do it? (You can adjust only the sign up bonus and the final year's cash flow.)
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