Bart Rogers was fourth runner up for the Heisman Award his senior year of college He was voted first team All American On Monday morning, his agent called to say that he was looking at four different proposals that a major West Coast professional football team had made for Barts services The team had drafted him in the first round of the NFL draft The West Coast NFL team offered the following four proposals The teams general manager, who was in charge of negotiations, said his team would stand behind any of the four offers and it was up to Bart and his agent to choose which they preferred Contract offer 1 $1,000,000 immediate sighting bonus $975,000 at the end of each year for the next five years Contract offer 2 $250,000 immediate signing bonus $120,000 at the end of each year for the next four years $225,000 at the end of years 5 through 10 $1,450,000 a year at the end of years 11 through 40 Contract offer 3 $1,500,000 immediate signing bonus, $600,000 at the end of year 1 $1,100,000 at the end of year 2 $1,600,000 at the end of year 3 $2,500,000 at the end of year 4 Contract offer 4 $1,200,000 signing bonus $2,500,000 and the end of each year for the next three years Bart was confused about the process for determining the actual numerical value of the offerings For example, the second contract offer from the U S team had a total dollar value of almost $46 million His agent began to explain to Bart the importance of the time value of money He said inflows in the future were not worth nearly as much as current inflows and that, therefore, they should be discounted back to the present at a 12 percent interest rate While Bart did not fully understand how the calculations were done, he knew he could rely on his agent to do the proper analysis The next two questions relate to the Bart Rogers case study Calculate the present value of the four contract proposals offered to Bart Rogers Which of the four contract offers has the highest present value What is this amount Show your work and explain your answer If a 6 percent discount rate was used rather than 12 percent, how might that change your answer to the previous question Which of the four contracts offered to Bart Rogers has the highest present value using a 6 percent discount rate Perform the necessary calculations Show your work and explain your answer

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Bart Rogers was fourth runner up for the Heisman Award his senior year of college. He was voted first team All American. On Monday morning,

Bart Rogers was fourth runner up for the Heisman Award his senior year of college. He was voted first team All American.

On Monday morning, his agent called to say that he was looking at four different proposals that a major West Coast professional football team had made for Barts services. The team had drafted him in the first round of the NFL draft. The West Coast NFL team offered the following four proposals. The teams general manager, who was in charge of negotiations, said his team would stand behind any of the four offers and it was up to Bart and his agent to choose which they preferred.

Contract offer 1:

$1,000,000 immediate sighting bonus.
$975,000 at the end of each year for the next five years.

Contract offer 2:

$250,000 immediate signing bonus.
$120,000 at the end of each year for the next four years.
$225,000 at the end of years 5 through 10.
$1,450,000 a year at the end of years 11 through 40.

Contract offer 3:

$1,500,000 immediate signing bonus,
$600,000 at the end of year 1.
$1,100,000 at the end of year 2.
$1,600,000 at the end of year 3
$2,500,000 at the end of year 4

Contract offer 4:

$1,200,000 signing bonus
$2,500,000 and the end of each year for the next three years.

Bart was confused about the process for determining the actual numerical value of the offerings. For example, the second contract offer from the U.S. team had a total dollar value of almost $46 million. His agent began to explain to Bart the importance of the time value of money. He said inflows in the future were not worth nearly as much as current inflows and that, therefore, they should be discounted back to the present at a 12 percent interest rate. While Bart did not fully understand how the calculations were done, he knew he could rely on his agent to do the proper analysis.

The next two questions relate to the Bart Rogers case study.

Calculate the present value of the four contract proposals offered to Bart Rogers. Which of the four contract offers has the highest present value? What is this amount? Show your work and explain your answer.

If a 6 percent discount rate was used rather than 12 percent, how might that change your answer to the previous question? Which of the four contracts offered to Bart Rogers has the highest present value using a 6 percent discount rate? Perform the necessary calculations. Show your work and explain your answer.