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(Solved) b. An investment within a firm. The general manager of a soccer club is considering paying $2.5 million per year for five years for a “star”...


b. An investment within a firm. The general manager of a soccer club is considering paying $2.5 million per year for five years for a “star” player, along with a $2 million up- front signing bonus. He expects the player to enhance gate receipts and television advertising revenues by $3.5 million per year with no added costs. The club requires a 9 percent return on its investments. What would be the value added from the acquisi- tion of the player?
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My teacher gave me solution that is PV of net cash flow $3.89m - 1m/year with 9% rate of return 2m= value added 1.89 Where does that $3.89m and $2m from?
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