Question

Talent signs a four-year endorsement deal with a prominent sponsor. Under this deal, the Talent will receive $5,000 each year for the first two years and $6,500 each year for the final two years. What is the present value of the total deal if the payments are discounted 6%

Answer 1

Answer:

Total present value                          $19,773.10

Explanation:

The computation of the present value is shown below:

Year     Cash flow     PVIF at 6%      Present value

0              -$                 1                         -$

1             $5,000      0.943                 $4,716.98

2            $5,000      0.890                 $4,449.98

3             $6,500     0.840                 $5,457.53

4             $6,500     0.792                 $5,148.61

Total present value                          $19,773.10