I need to do this in Excel, there are so many answers out there and I am not sur
ID: 1138792 • Letter: I
Question
I need to do this in Excel, there are so many answers out there and I am not sure which one is correct, please help me understand this
ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televised Monday night football. What is the net present value of this investment if the parent Disney Company has an opportunity interest rate equal to its cost of capital of 9 percent. Fox and CBS agreed to pay $712 million and $622 million respectively for six years to televise Sunday afternoon NFC games. What was the worth?
Explanation / Answer
Net present worth of the investment by ESPN = PV(9%,8,-1.1) = $6.09 billion where interest rate is 9%, time is 8 years and annual cost is 1.1 billion. (This is an excel command that results in direct answers)
Net present worth of the investment by FOX = PV(9%,6,-712) = $3.194 billion and that by CBS = PV(9%,6,-622) = $2.79 billion where interest rate is 9%, and time is 6 years. The total net worth is therefore $5.984 billion. (Again these are excel commands that result in direct answers).