Carla Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $7,500,000 and annual payments of $2,500,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $21,900,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1$2,500,000Year 22,580,000Year 32,660,000Year 42,740,000Year 52,920,000Year 5 balloon payment8,500,000Total$21,900,000

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Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of 15 percent. In present value terms, how much better is the second contract?(Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answers to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Present value of old contract

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Present value of new contract

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