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A first-round draft choice quarterback has been signed to a three-year, $25 million contract. The details provide for an immediate cash bonus of $2 million.
A first-round draft choice quarterback has been signed to a three-year, $25 million contract. The details provide for an immediate cash bonus of $2 million. The player is to receive $5 million in salary at the end of the first year, $8 million the next, and $10 million at the end of the last year. Assuming a 15 percent discount rate, is this package worth $25 million? If not, how much is it worth? (HINT: this is NOT an annuity problem.)
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