Question
A baseball player is offered a 5year contract which pays him the following amounts at the end of each year: Year 1: $900,000; Year 2:
A baseball player is offered a 5year contract which pays him the following amounts at the end of each year: Year 1: $900,000; Year 2: $1,200,000; Year 3: $1,500,000; Years 4 & 5: $1.8 million each. Instead of accepting the contract, the player asks for a contract that, in presentvalue terms, is worth $0.595 million more than what's been offered. In addition, the player's counteroffer asks for five equal, beginningofyear payments. Assume that the appropriate discount rate is 10%/year. If the team were to agree to the player's counteroffer, what would be the player's salary per year?
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