I only want the CFD\'s. I will solve from that point. The football coach at Midw
ID: 1848668 • Letter: I
Question
I only want the CFD's. I will solve from that point.The football coach at Midwestern university was given a 5 year employment contract that paid $225,000 the first year, and increased 8% uniform rate in each subsequent year. At the end of the first year the alumni demanded that he be fired. They agreed to buy his contract by paying him the equivalent present sum, computed using 12% interest rate. How much will the coach receive?
(Teacher's note - Assumptions- you are required to compute the remaining 4 years of his contract and he gets paid in full at the end of each year. Also repeat the problem using 8% interest instead of 12%)
Explanation / Answer
The coach could expect to receive over the next 4 years is: 225000*(1.08)+225000*(1.08)^2+225000*(1.08)^3+225000(1.08)^4 To get the present value, divide the first term by (1.12), the second term by (1.12)^2, the third by (1.12)^3, and the fourth by (1.12)^4 =822461.872983