An NBA center recently signed a seven-year contract for $121 million. What is the present value of this contract, given a 9% interest rate? In other words, how much must the ball club invest when the contract is signed, so that it can make seven equal payments of $17285714.29, the first one due immediately?

PV = $86,998,184.72

Step-by-step explanation:

Giving the following information:

Annual payments = $17,285,714.29

Number of years = 7

Interest rate = 9%

First, we need to determine the future value incorporating the interest rate.

FV = {A*[ (1+i) ^n-1]}/i

A = annual payment

FV = {17,285,714.29 * [ (1.09^7) - 1]} / 0.09

FV = $159,036,085.1

Now, we can calculate the present value:

PV = FV / (1+i) ^n

PV = 159,036,085.1/1.09^7

PV = $86,998,184.72