Question
Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evaluating three contract options. Each option offers a signing
Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evaluating three contract options. Each option offers a signing bonus and a series of payments over the life of the cont
Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evaluating three contract options. Each option offers a signing bonus and a series of payments over the life of the contract. Fisher uses a 9.35 percent rate of return to evaluate the contracts. Given the cash flows for each option below, find the present value of each alternative.
Year | Cash Flow Type | Option A | Option B | Option C |
0 | Signing Bonus | $3,100,000 | $4,000,000 | $4,250,000 |
1 | Annual Salary | $650,000 | $825,000 | $550,000 |
2 | Annual Salary | $715,000 | $850,000 | $625,000 |
3 | Annual Salary | $822,250 | $925,000 | $800,000 |
4 | Annual Salary | $975,000 | $1,250,000 | $900,000 |
5 | Annual Salary | $1,100,000 | $1,000,000 | |
6 | Annual Salary | $1,250,000 |
(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your input answers to the nearest dollar.)
a.Find the present value of each alternatives:
Present value of Option A | $ |
Present value of Option B | $ |
Present value of Option C | $ |
b) Which option should he choose
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