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As a sports agent you are negotiating the contract for a newly drafted player. Three possible contracts are being examined as follows: Timing of Payment

As a sports agent you are negotiating the contract for a newly drafted player. Three possible contracts are being examined as follows: Timing of Payment Contract 1 Contract 2 Contract 3 Today $5,000,000 1 Year From Today $2,500,000 $1,000,000 2 Years From Today $2,500,000 $1,000,000 3 Years From Today $2,500,000 $1,000,000 4 Years From Today $5,000,000 $2,500,000 $7,500,000 (a) Assuming a 5% interest rate, what is the current present value of contract 1? (b) Assuming a 5% interest rate, what is the current present value of contract 2? (c) Assuming a 5% interest rate, what is the current present value of contract 3? (d) Which contract do you, the agent (representing the player), prefer? (e) Which contract does the

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