In January 2016, Lukas Dhlomo, one of South Africa's best-known rugby players, signed a contract to...

 

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In January 2016, Lukas Dhlomo, one of South Africa's best-known rugby players, signed a contract to play, and later coach, for Pirahna Rugby Club. In terms of his contract, he was guaranteed earnings of R6 075 000 over a 20-year period, broken down as follows: YEAR EARNINGS (RANDS) 2016 2017 2018 2019 2020 2021 to 2025 2026 to 2035 TOTAL 875 000 650 000 800 000 1 000 000 300 000 240 000 per annum 125 000 per annum 6 075 000 Required: (a) Calculate the contract value when Lukas signed it on the first of January of this year, if the relevant rate of interest is 8% per annum, and earnings are received at the end of each year. (b) If Lukas would prefer to receive an equal annual salary at the end of each year for the period 2016-2035, as opposed to the uneven earnings listed above, calculate the equal annual salary he should ask for. In January 2016, Lukas Dhlomo, one of South Africa's best-known rugby players, signed a contract to play, and later coach, for Pirahna Rugby Club. In terms of his contract, he was guaranteed earnings of R6 075 000 over a 20-year period, broken down as follows: YEAR EARNINGS (RANDS) 2016 2017 2018 2019 2020 2021 to 2025 2026 to 2035 TOTAL 875 000 650 000 800 000 1 000 000 300 000 240 000 per annum 125 000 per annum 6 075 000 Required: (a) Calculate the contract value when Lukas signed it on the first of January of this year, if the relevant rate of interest is 8% per annum, and earnings are received at the end of each year. (b) If Lukas would prefer to receive an equal annual salary at the end of each year for the period 2016-2035, as opposed to the uneven earnings listed above, calculate the equal annual salary he should ask for.

Answer rating: 100% (QA)

a To calculate the contract value at the time of signing we need to find the present value of all fu... View the full answer