Gavin Goldenarm's Contract Evaluation Worksheet I've also attached a worksheet that you can use to analyze the deal. Im in negotiations for the rest of the day, so let's discuss your thoughts on the contract proposal tomorraw. I'm proud of youl Take care, Noah Noat Never-Enough Sports Agent, RSR Talent Management InC. I Springfield win is so excrtedi According to Nosh, the contract is worth $3,192,400-assuming recept of all possible bonuses. After rereading the email twice d calling his familly, Gavin called you to review the terms of the contract and verify Noahs calculations. Atter an extended conversation about what eN do with his newfound wealth, you and Gavin have agreed that any funds received could be invested to eam 8.00%, compounded monthly. Contract Evaluation Worksheet Complets the following worksheet by inserting the appropriate values to evaluate the contract and answer the related questions. Notet To clarify possbie sources of confuslan and simplify your calculations: - Aswime that all-bonuses are earned in each of the vears for which they are avalable and are paid at the end of the corresponaing year(s), unless specincally stated deferenty. Fheir value should be based on the salory in effect at the time the bonuses were eamed. - The endorservent proceteds are paid in sccordance with the terms of the deal. - Remember that the timing of s cash now affects the interest rate that is uted to discount the cauh now. for example, annual interest mes vheuld be used to dicourit annual cash flows, and monthy interest rates are used to discoune monthly cash fors. Therefore, ther be necosasary to compute the approprate interest rate that shovid be vied in a divcounting caloulation. - Nound ait dollar ambunts to the nearst whole dolar and carry out all interest rate tactors to four decimal places. whluss to calculate knotwer anumer, do not round. 16. Application of Time Value of Money Skills Gavin Goldenarm has been playing baseball since he was five years old and has always drearned of playing in the big leagues, Last season, he was a starting pitcher for a double-A (A)-leves baseball team, the Roswell Extraterrestrials; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 96 mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a 16-3 win-loss record, an earned run average (ERA) of 2.98, and 146 strikeouts in 117.0 innings pitehed. He is also your best friend. Two weeks ago, on his three-year anniversary with the team, Gavin received the following email from his agent, Noah Never-Enough, indicating that he is being called up to the Springfield Dusties, the Extraterrestrials's corresponding Major League Baseball (MLB) team. Moreover, Gavin's contract is being revised to reflect his new status. The emall describes the general terms and conditions of Gavin's revised contract. From: Noah Never-Enough To: Gavin Goldenarm Subject: New Team, New Contract Proposal Gavin, Congratulationst Youve been called up to the Springfield Dusties. Below are the offered terms and condicions of vour new contrast. After you review them and think about the offec, ceil me and weve discuss vour options. Congrats again! Selary and Incentives: - Gavin Goldenarm hereafter referred to as the "plaver," is offered a four-vear contract with an annuat sabry of 3594,000 per year, to be pald at the end of fach month in the contract term. - Under the ieague's collective bargaining agrement, the plaver wil receve a 4s. cost-ofiliving adpustment (COLA) to his annual salary at the beginning of - Under the league's collective bargaining agreement, the Plaver will receive a 4% cost-of-living 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 participation 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 Plaver is offered the following award-based performance incentive: a 15% bonus if he is designated as the Most valuable Player (MVP) in the league. The Player is also offered the following milestone bonus: a $100,000 bonus if he ties Nolan Ryan's 1973 single-season strikeout record ( 383 strikeouts). - The Player is eliglble 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 earned, the performance and milestone bonuses will be distributed in a single payment at the beginning of the next contract year, Athough this proposal describes only one milestone, the actual contract contains several progressive milestones. Fxceeding one misestone creates the opportunity to exceed another. In addition to the proposal offered by the Dusties, twe also been able to secure the following endorsement opportunity A local car dealer has offered you a cantract that will pay $3,000 per manth for two years. This contract is conbingent on your accepting the contract with the Dusties and will take effect immedatefy upon slgning vour MLE contract, In return for these parments, you wail participate in the dealerls promotional evems, whi is signing autograghs and allowing photographa as requested. 1. Given vour worksheet calculations, which of the following statements is accurate? Is Noahs eitimate of the value of Gavin s contract accurate on either a nominal or discounted buss? check alf that apply IX aporopriate and necessary to discount the performance bonus using the bank account's effective annual interest rate because of differences in the timing of the compounding of the bark account and that of the parments for the performance banus: It is appropriate and necestary to ciscount the endorsement contract aving the bank account's effective annusi interest rate because of differences in the timing of the compounding of the bank account and that of the pawments on the endorsement contract. Noahs etimate of the nominal value of Cavin's comect is cerrect. Metated Question; The local car dealer creating Gavin's endorsement opportunaty can earn 6\% (compounded quarteriy) on his deposted funds. 5he novild hove to seposit each quarteg, warting exoctly two years before the day Gavin ulgns his contract, to fund her endorsernent