Problem:
A basketball player has just signed a $30 million contract to play for three years. She will receive $5 million as an immediate cash bonus, $5 million at the end of the first year, $8 million at the end of the second year, and the remaining $12 million at the end of the contract.
Required:
Question: Assuming a discount rate of 10 percent, what is the value of the package?
Note: Provide support for your rationale.