Flynn Fireballer has been playing baseball since he was five years old and has always dreamed of playing in the big leagues. Last season, he was a Flynn is so excitedl According to Noah, the contract is worth $$2,520,400-$assuming receipt of all possible bonuses. After rereading the email twice and

calling his family, Flynn called you to review the terms of the contract and verify Noah's calculations. After an extended conversation about what he'lldo with his newfound wealth, you and Flynn have agreed that any funds received could be invested to earn $9\mathrm{.}00\%,$ compounded

Contract Evaluation Worksheet

Complete the following worksheet by inserting the appropriate values to evaluate the contract and answer the related questions.

Note: To clarify possible sources of confusion and simplify your calculations:

Assume that all bonuses are earned in each of the years for which they are available 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

earned.

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 cash flows. 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 dollar 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 dollar, however when using those same

values to calculate another answer, do not round.

Flynn Fireballer's Contract Evaluation Worksheet Flynn Fireballer's Contract Evaluation Worksheet

A

$1$ Assumptions and Calculated

Values

$2$ Bank Rate Information:

$3$ Flynn$\text{'}$s Bank Account Rate

$\%$

$($compounded monthly$)$

$4$ Monthly Bank Rate

$\%$

$5$ Effective Annual Interest Rate

$\%$

$6$

$7$ Salary and Bonus

Information:

$8$ Annual Salary $(4\%$ COLA$)$

Year $2$

Year $3$

Year $4$

Total value

$9$ Monthly Salary

$10$ Discount factor $($based on Cell

B$4$ above$)$

$11$ Discounted Annual Salary

$5$ s$.$

$8$

$

$$.$

$8$

$11\mathrm{.}434912673$

$10\mathrm{.}45423346$

$12$

$13$ Time$-$in$-$League Bonus

$0\mathrm{.}9562$

$14$ Discount factor $($based on Cell

B$4$ above$)$

$15$ Discounted Time$-$in$-$League

$

$8\mathrm{.}737976633897$

$5$

$

$14$ Discount factor $($based on Cell $0\mathrm{.}9562$

B$4$ above$)$

$15$ Discounted Time$-$in$-$League

Bonus

$16$

$17$ Milestone Bonus

$18$ Discount factor $($based on Cell

$0\mathrm{.}9142$

B$5$ above$)$

$19$ Discounted Milestone Bonus

$

$0\mathrm{.}8358$

$0\mathrm{.}7641$

$0\mathrm{.}6986$

$20$

$\backslash$table$[[21,$Performance Bonus,$],[22,$Discount factor $($based on Cell,$0\mathrm{.}9142]]$

$

$

$

B$5$ above$)$

$23$ Discounted Performance Bonus

$

$0\mathrm{.}7641$

$0\mathrm{.}6986$

$24$

$25$ Monthly Endorsement Contract

$

Payment

$26$ Discount factor $($based

starting pitcher for a double$-$A $($AA$)-$level baseball team, the Dodge City dowboys; last year, he was the first runner$-$up for the Minor League Player of

the Year award. Using his $99mph$ fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a $18-2$ win$-$loss record, an

earned run average $($ERA$)$ of $2\mathrm{.}23,$ and $166$ strikeouts in $147\mathrm{.}2$ innings pitched. He is also your best friend.

Two weeks ago, on his three$-$year anniversary with the team, Flynn received the following email from his agent, Noah Never$-$Enough, indicating that

he is being called up to the Springfield Dusties, the Cowboys's corresponding Major League Baseball $($MLB$)$ team. Moreover, Flynn$\text{'}$s contract is being

revised to reflect his new status. The email describes the general terms and conditions of Flynn$\text{'}$s revised contract.

the beginning of the next contract year. Although this proposal describes only

one milestone, the actual contract contains several progressive milestones.

Exceeding one milestone creates the opportunity to exceed another.

In addition to the proposal offered by the Dusties, I've also been able to secure the

following endorsement opportunity:

A local car dealer has offered you a contract that will pay $$800$ per month for two

years. This contract is contingent on your accepting the contract with the Dusties

and will take effert immerliatalu uinnn sinninn unur MI R mntrart In raturn for

Flynn is so excited! According to Noah, the contract is worth $$2,520,400-$assuming receipt of all possible bonuses. After rereading the email twice and