Question
A creative general manager has offered two different contracts to a vain quarterback. The contracts are shown below: CONTACT A CONTRACT B
A creative general manager has offered two different contracts to a vain quarterback. The contracts are shown below:
| CONTACT A | CONTRACT B | ||
|---|---|---|---|
| YEAR | SALARY | YEAR | SALARY |
| 0 | $510,100.00 | 0 | $306,275.00 |
| 1 | $510,100.00 | 1 | $306,275.00 |
| 2 | $510,100.00 | 2 | $803,550.00 |
| 3 | $510,100.00 | 3 | $803,550.00 |
| 4 | $510,100.00 | 4 | $803,550.00 |
The newspapers report the total dollars of the contract, so contract A will pay a total of $2,550,500.00, while contract B will pay $3,023,200.00. The player will select contract B as it has more publicity. The team can earn 8.00% on their investments, so let's determine the value of each contract.
What is the present value of contract B?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To determine the present value of each contract we need to discount the future cash flows using the ...
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Linear Algebra A Modern Introduction
Authors: David Poole
3rd edition
9781133169574 , 978-0538735452
