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Harry Hurler has been playing baseball since he was five years old and has always dreamed of playing in the big leagues. Last season, he
Harry Hurler 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 starting pitcher for a doubleA AAlevel baseball team, the Yakima Hops; last year, he was the first runnerup for the Minor League Player of the Year award. Using his mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a winloss record, an earned run average ERA of and strikeouts in innings pitched. He is also your best friend.
Two weeks ago, on his threeyear anniversary with the team, Harry received the following email from his agent, George GetdBucks indicating that he is being called up to the Boston Back Bay Boys, the Hopss corresponding Major League Baseball MLB team. Moreover, Harrys contract is being revised to reflect his new status. The email describes the general terms and conditions of Harrys revised contract.
Congratulations! Youve been called up to the Boston Back Bay Boys. Below are the offered terms and conditions of your new contract.
Harry Hurler hereafter referred to as the Player is offered a fouryear contract with an annual salary of $ per year, to be paid at the end of each month in the contract term.
Under the leagues collective bargaining agreement, the Player will receive a costofliving adjustment COLA to his annual salary at the beginning of every other year. This means that the Players annual salary will increase at the beginning of year and year as applicable.
In addition, the Player will receive a onetime $ timeinleague bonus after six months of participation with an MLB team. This bonus will be paid immediately on completion of the sixmonth period.
The Player is offered a performancebased bonus, as well as a milestone bonus. Both are intended to encourage outstanding performance.
The Player is offered the following awardbased performance incentive: a bonus payable at the end of the operating year if he is selected to play in the AllStar game. The Player is also offered the following milestone bonus: a $ bonus if he ties Nolan Ryans singleseason strikeout record strikeoutsThe 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 Players 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. Although this proposal describes only one milestone, the actual contract contains several progressive milestones. Exceeding one milestone creates the opportunity to exceed another.
A local car dealer has offered you a contract that will pay $ per month for two years. This contract is contingent on your accepting the contract with the Back Bay Boys and will take effect immediately upon signing your MLB contract. In return for these payments, you will participate in the dealers promotional events, such as signing autographs and allowing photographs as requested.
Harry is so excited! According to George, the contract is worth $assuming receipt of all possible bonuses. After rereading the email twice and calling his family, Harry called you to review the terms of the contract and verify Georges calculations. After an extended conversation about what hell do with his newfound wealth, you and Harry have agreed that any funds received could be invested to earn compounded monthly Assumptions and
Calculated Values
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