Question
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
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 | $524,900.00 | 0 | $300,725.00 |
| 1 | $524,900.00 | 1 | $300,725.00 |
| 2 | $524,900.00 | 2 | $807,000.00 |
| 3 | $524,900.00 | 3 | $807,000.00 |
| 4 | $524,900.00 | 4 | $807,000.00 |
The newspapers report the total dollars of the contract, so contract A will pay a total of $2,624,500.00, while contract B will pay $3,022,450.00. The player will select contract B as it has more publicity. The team can earn 5.00% on their investments, so let's determine the value of each contract.
What is the present value of contract B?
Answer format: Currency: Round to: 2 decimal places
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Corporate Finance For Dummies
Authors: Michael Taillard
2nd Edition
1119850312, 978-1119850311
