Suppose Frederik Andersen is negotiating a new contract with the Toronto Maple Leafs in 2021. The Leafs
Question:
Suppose Frederik Andersen is negotiating a new contract with the Toronto Maple Leafs in 2021. The Leafs offer him a two-year contract in January 2021 with the following provisions:
a. | $6 million signing bonus. |
b. | $7 million per year for two years. |
c. | Seven years of deferred payments of $2.15 million per year, with the first payment starting at the end of year 3. |
d. | A games-played bonus provision that totals $1.36 million per year for the two years of the contract. |
Assume that Frederik achieved his bonus requirements both years and he signed the contract right away on January 1, 2021. Assume that cash flows are discounted at 11.8 percent. Ignore any taxes. Frederik’s signing bonus was paid on the day the contract was signed. His salary and bonuses, other than the signing bonus, are paid at the end of the year. What was the PV of this contract in January when Frederik signed it? (Do not round intermediate calculations. Round the answer to 2 decimal places. Omit $ sign in your response.)
Present value =
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith