1)A professional footy player and his agent are evaluating three contract options to play in the Australian Football League (AFL). Each option offers a signing bonus and a series of payments over the life of the contract. The player uses 7.25% rate of return (compounded annually) to evaluate the options.

Year Cash flow Richmond Hawthorn Collingwood Football Club Football Club Football Club signing bonus $3,500,000 $3,500,000 $3,500,000 Annual Salary $700,000 $850,000 $775,000 2 Annual Salary $750,000 $800,000 $775,000 Annual Salary $800,000 $750,000 $775,000 Annual Salary $850,000 $700,000 $775,000