Congratulations! You've been called up to the E1 Paso Grandies. Below are the offered terms and conditions of your new contract. After you review them and think about the offer, call me and we'l discuss your options. Congrats again! Salary and Incentives: Nick Nohitter hereafter referred to as the "Player," is offered a four-year contract with an annual salary of $414,000 per year, to be paid at the end of each month in the contract term. - Under the league's collective bargaining agreement, the Player will receive a 4% cost-pf-iving adjustment (COLA) to his annual salary at the beginning of every other year. This means that the Player's annual salary will increase at the beginning of year 2 and year 4 , as applicable. - In addition, the Player will receive a one-time $15,000 time-in-league bonus after six months of partiopation with an MLB team. This bonus will be paid immediately on completion of the six-month period. - The Player is offered a performance-based bonus, as well as a milestone bonus. Both are intended to encourage outstanding performance. - The Player is offered the following award-based performance incentive: a 15% bonus payable at the end of the operating year if he is selected to play in the Al-Star game. The Player is also offered the following milestone bonus: a $75,000 bonus if he ties Nolan Ryan's 1973 single-season strikeout record (383 strkeouts). - The Player is eligible for each potential bonus each year that the contract is in effect and, if expressed as a percentage, will be based on the value of the Player's base annual salary for the corresponding year, If eamed, the performance and milestone bonuses will be distributed in a single payment at the beginning of the next contract year. Although this proposal describes only In addition to the proposal offered by the Grandies, 1've also been able to secure the following endorsement opportunity: A local car dealer has offered you a contract that will pay \$2,750 per month for two years. This contract is contengent on your accepting the contract with the Grandies and will take effect immediately upon signing your MLB contract. In retum for these payments, you will participate in the dealer's promotional events, such as signing autographs and alowing photographs as requested. Nick is so excitedi According to George, the contract is worth $2,264,400-assuming receipt of all possible bonuses. After rereading the email twice caling his family, Nick called you to review the terms of the contract and verify George's calculations. After an extended conversation about what he'l with his newfound wealth, you and Nick have agreed that any funds received could be invested to earn 9.00%, compounded monthly. Contract Evaluation Worksheet Complete the following worksheet by inserting the appropriate values to evaluate the contract and answer the related questions. Note: To darify possible sources of confusion and simplify your calculations: - Assume that all bonuses are eamed in each of the years for which they are avalable and are paid at the end of the corresponding year(s), unless specifically stated differently. Their value should be based on the salary in effect at the time the bonuses were eamed. - The endorsement proceeds are paid in accordance with the terms of the deal. - Remember that the timing of a cash flow affects the interest rate that is used to discount the cash flow. For example, annual interest rates should be used to discount annual cash flows, and monthly interest rates are used to discount monthly casti fows. Therefore, it may be necessary to compute the appropriate interest rate that should be used in a discounting calculation. - Round all dollar amounts to the nearest whole dolar and carry out all interest rate factors to four decimal places.; - When entering intermediate values as answer choices, be sure to round them to the nearest dollac however when using those same values to calculate another answer, do not round. Nick Nohitter's Contract Evaluation Worksheet Cell B4 above) 15 Discounted Time-in-League Bonus 16 17 Milestone Bonus 18 Discount factor (based on Cell BS above) 19 Discounted Mlestone Bonus 20 24 Monthly Endorsement 25 Contract Payment 26 Discount factor (based 27 Cell B4 above) 27 Discounted Monthly Endorsement Payment 2.8 29 Contract's Total Nommat Value 30 Contract's Total Dscounted Value 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the vahue of Nick's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate and necessary to discount the performance bonus using the bank occount's effective annual interest rate because of differences in the timing of the compounding of the bank account and that of the payments for the peiformance bonus., It is appropriate and necessary to discount the endorsement contract using the bank account's effective annual interest tate beciuse of differences in the timing of the compounding of the bank account and that of the payments on the endorsement contract. George's estimate of the value of Nick's contract is incorrect on a nominal basis, and the efror is $31,938. Related Question: The local car dealer creating Nick's endorsement opportunity can eam 6% (compounded quarterly) on his deposited finds, she would have to deposit each quarter, starting exactly two years before the day Nick signs his contract, to fund her endorsement Contract. [Note: The future value interest factor of 6% compounded quarterly for eight quartenly periods is 8.4328. ] Congratulations! You've been called up to the E1 Paso Grandies. Below are the offered terms and conditions of your new contract. After you review them and think about the offer, call me and we'l discuss your options. Congrats again! Salary and Incentives: Nick Nohitter hereafter referred to as the "Player," is offered a four-year contract with an annual salary of $414,000 per year, to be paid at the end of each month in the contract term. - Under the league's collective bargaining agreement, the Player will receive a 4% cost-pf-iving adjustment (COLA) to his annual salary at the beginning of every other year. This means that the Player's annual salary will increase at the beginning of year 2 and year 4 , as applicable. - In addition, the Player will receive a one-time $15,000 time-in-league bonus after six months of partiopation with an MLB team. This bonus will be paid immediately on completion of the six-month period. - The Player is offered a performance-based bonus, as well as a milestone bonus. Both are intended to encourage outstanding performance. - The Player is offered the following award-based performance incentive: a 15% bonus payable at the end of the operating year if he is selected to play in the Al-Star game. The Player is also offered the following milestone bonus: a $75,000 bonus if he ties Nolan Ryan's 1973 single-season strikeout record (383 strkeouts). - The Player is eligible for each potential bonus each year that the contract is in effect and, if expressed as a percentage, will be based on the value of the Player's base annual salary for the corresponding year, If eamed, the performance and milestone bonuses will be distributed in a single payment at the beginning of the next contract year. Although this proposal describes only In addition to the proposal offered by the Grandies, 1've also been able to secure the following endorsement opportunity: A local car dealer has offered you a contract that will pay \$2,750 per month for two years. This contract is contengent on your accepting the contract with the Grandies and will take effect immediately upon signing your MLB contract. In retum for these payments, you will participate in the dealer's promotional events, such as signing autographs and alowing photographs as requested. Nick is so excitedi According to George, the contract is worth $2,264,400-assuming receipt of all possible bonuses. After rereading the email twice caling his family, Nick called you to review the terms of the contract and verify George's calculations. After an extended conversation about what he'l with his newfound wealth, you and Nick have agreed that any funds received could be invested to earn 9.00%, compounded monthly. Contract Evaluation Worksheet Complete the following worksheet by inserting the appropriate values to evaluate the contract and answer the related questions. Note: To darify possible sources of confusion and simplify your calculations: - Assume that all bonuses are eamed in each of the years for which they are avalable and are paid at the end of the corresponding year(s), unless specifically stated differently. Their value should be based on the salary in effect at the time the bonuses were eamed. - The endorsement proceeds are paid in accordance with the terms of the deal. - Remember that the timing of a cash flow affects the interest rate that is used to discount the cash flow. For example, annual interest rates should be used to discount annual cash flows, and monthly interest rates are used to discount monthly casti fows. Therefore, it may be necessary to compute the appropriate interest rate that should be used in a discounting calculation. - Round all dollar amounts to the nearest whole dolar and carry out all interest rate factors to four decimal places.; - When entering intermediate values as answer choices, be sure to round them to the nearest dollac however when using those same values to calculate another answer, do not round. Nick Nohitter's Contract Evaluation Worksheet Cell B4 above) 15 Discounted Time-in-League Bonus 16 17 Milestone Bonus 18 Discount factor (based on Cell BS above) 19 Discounted Mlestone Bonus 20 24 Monthly Endorsement 25 Contract Payment 26 Discount factor (based 27 Cell B4 above) 27 Discounted Monthly Endorsement Payment 2.8 29 Contract's Total Nommat Value 30 Contract's Total Dscounted Value 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the vahue of Nick's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate and necessary to discount the performance bonus using the bank occount's effective annual interest rate because of differences in the timing of the compounding of the bank account and that of the payments for the peiformance bonus., It is appropriate and necessary to discount the endorsement contract using the bank account's effective annual interest tate beciuse of differences in the timing of the compounding of the bank account and that of the payments on the endorsement contract. George's estimate of the value of Nick's contract is incorrect on a nominal basis, and the efror is $31,938. Related Question: The local car dealer creating Nick's endorsement opportunity can eam 6% (compounded quarterly) on his deposited finds, she would have to deposit each quarter, starting exactly two years before the day Nick signs his contract, to fund her endorsement Contract. [Note: The future value interest factor of 6% compounded quarterly for eight quartenly periods is 8.4328. ]