SOLUTION: mohamad sallah agreed to sign the eight-year £ 50 million contract which at that time made him the highest paying player in the history of liverpool's professional football. this c

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Question 1102388: mohamad sallah agreed to sign the eight-year £ 50 million contract which at that time made him the highest paying player in the history of liverpool's professional football. this contract includes a bonus signing of £ 11 million in annual £ 2.5 million salary in 2017, £ 1.75 million in 2018, £ 4.15 million in 2019, £ 4.90 million in 2020, £ 5.25 million in 2021, £ 6.2 million in 2022, £ 6.75 million in 2023 and £ 7.5 million in 2024. the £ 11 million signing bonus has been made during the contract until an additional £ 1.375 million has been paid each year within the eight month contract period. with pay paid at the start of each season. what is the contract value at 6% interest rate?
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
the following spreadsheet printout shows the calculations.
look below for further comments.

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the total of all payments made was 50 million pounds.
that is shown at the bottom of column I.

the present value of all payments taken to 2017 at 6% per year = 39.547241999 million pounds.
that is shown at the bottom of column J.

the 39.547241999 million pounds given to him in 2017 has the same investment value to him as the payments given to him in each year.

what this means is:

if he took the 39.547241999 million pounds given to him at the beginning of the first season and invested it at 6% per year until the beginning of the season in 2024, he would have the same money as if he took the money given to him at the beginning of each season and invested each one at 6% until the beginning of 2024.

each year shown in the spreadsheet represents the beginning of the season in that year.

for example:

the total pay of 6.625 given to him in 2021 is given at the beginning of the season in 2021.

the present value of total pay of 5.247620519 given to him in 2021 is given at the beginning of the season in 2021.

the sum of the present value of total pay taken to 2017 at 6% per year is taken to the beginning of the season in 2017.

the sum of the future value of total pay and the sum of the future value of present pay taken to 2024 at 6% per year is take to the beginning of the season in 2024.