1.What do the timelines look like for each of Scialomie's contract offers? That is, what is the nominal value of each payment and when is each payment happening?

2.What is the total PV of each contract offer assuming the most likely discount rate of 5.5%? What if the rate is 3.0%? Or 8.0%?

a.Based strictly on obtaining the highest PV contract for her client, which offer should Regine accept at each of the different rates?

3.Offer #4 has a lump sum payment of $25m happening at t₂₀. The Orioles may want to prepare for that payment by investing a little money in advance rather than needing to find all the money to handle this large expense in year 20. In fact, the CBA mandates that deferred money is fully funded within two years of the associated playing year (see Table 1). Regine was surprised to see that baseball is the only league with such a rule. If the baseball CBA were like those of other leaguesi.e., the Orioles had freedom to fund their future obligations in however they wantedhow much would the Orioles have to invest in each of the following four scenarios to fully fund the account? That is, how much do they need to put away in present value dollars to have $25m when the deferred compensation obligation comes due? Assume a 5.5% discount rate for each of the different funding approaches.

a.The Orioles make a single deposit today (t₀).

b.The Orioles invest a small amount into an account each year, making constant payments annually starting at t₁ and ending at t₂₀.

4.Regine believes the Orioles might have some hesitation about locking in Scialomie for five years, so she thinks about proposing a four-year contract instead of the five-year deal. In such an offer, she knows that there needs to be enough deferred compensation so that Scialomie's salary over the four years of playing does not overly burden team payroll. Design two contract counteroffers for Regine to present to the Orioles. They must be structured differently

from each otherto give the Orioles some optionsand both must meet the following characteristics:

a. The contract has a total PV of between $15.5m and $16.0m, assuming a 5.5% discount rate

b. Scialomie must earn at least $0.6m (nominal value) in each of the playing years

c. There is deferred compensation build into the contract.