Question
(a)A Kenya top basketballer is negotiating a contract with Lions Basketball Club. His opportunity cost is 12%. He has been offered three possible 4-year contracts.
(a)A Kenya top basketballer is negotiating a contract with Lions Basketball Club. His opportunity cost is 12%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the start of each year. Terms of each contract are as follows:
Contract
Year
1
2
3
4
X
Sh.850,000
Sh.850,000
Sh.850,000
Sh.850,000
Y
Sh.750,000
Sh.850,000
Sh.900,000
Sh.950,000
Z
Sh.1,050,000
Sh.700,000
Sh.720,000
Sh.680,000
As his manager, which contract would you recommend that he accept and why?
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Microeconomics Principles, Problems and Policies
Authors: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn
20th edition
978-0077660819, 77660811, 978-1259450242
