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

Total present value $19,773.10

Step-by-step 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