Hi all! I am finishing up this assignment and just need some help at explaining what to do. All help is appreciated!
16. Application of Time Value of Money Skills Harry Hurler has been playing baseball since he was five years cld and has always drearned of playing in the big leagues. Last season, he was a starting pitcher for a double-A (AA)-level baseball tearn, the Dodge Gity Cowboys; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 99 mph 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 2.23, and 166 strikeouts in 147.2 irnings pitched. He is also your best Iriend. Two weeks ago, on his three-year anniversary with the tearn, Harry received the following email from his agent, George Get-d'Eucks, indicating that he is being called up to the Mobile Bayhoppers, the Cowboys's corresponding Major League Baseball (M.B) team. Moreover, Harry's contract is being revised to reflect his new status. The email describes the general terms and conditions of Harry's revised contract. Harry is so exoited! According to George, the contract is worth 52,660,400-assuming receipt of all possible bonuses. After rereading the ernail twice and calling his family, Harry called you to review the terms of the contract and verify George's calculations. After an extended conversation about what. he'll do with his newlound wealth, you ard Harry have agreed that atry funds received could be invested to eam 6.5095, 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 earned in each of the years for which they are avallable 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 tirning of a cash flow alfects the interest rate that is used to discount the cash flow, For example, aninual interest rates should be used to discount annual cash flows, and monthly interest rates are used to discount monthly cash Jlows. Therefore, it may be necessary to compute the appropriate interest rate that should be used in a discounting calculation. - Round all dollar arnounts to the nearest whole doilar and camy 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 sarne values to calculate another answer, do not round. Harry Hurler's Contract Evaluation Worksheet 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the value of Harry's cositract accurate on either a norninal or discounted basis? Check ail that apply. It is appropriate and riecessary to discount the endorsentent contract using the bank account's effective annual interest rate because of differences in the timing of the compounding of the bank account and that of the payrnents on the endorsement contract. George's estirnate of the value of Harry's contract is incorrect on a nominal basis, and the error is $28,088. George's estimate of the nominal value of Harry's contract is correct. Related Question: The Iocal car dealer creating Harry's endorsement opportunity can earn 6 ns (cumpounded quarterly) on his deposited funds. She would have to deposit. each quarter, starting exactly two years before the day Harry signs his contract, to fund her endorsernent. contract. [Note: The future value interest factor of 6% compounded quarterly for eight quarterfy periods is 8.4328. ] 16. Application of Time Value of Money Skills Harry Hurler has been playing baseball since he was five years cld and has always drearned of playing in the big leagues. Last season, he was a starting pitcher for a double-A (AA)-level baseball tearn, the Dodge Gity Cowboys; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 99 mph 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 2.23, and 166 strikeouts in 147.2 irnings pitched. He is also your best Iriend. Two weeks ago, on his three-year anniversary with the tearn, Harry received the following email from his agent, George Get-d'Eucks, indicating that he is being called up to the Mobile Bayhoppers, the Cowboys's corresponding Major League Baseball (M.B) team. Moreover, Harry's contract is being revised to reflect his new status. The email describes the general terms and conditions of Harry's revised contract. Harry is so exoited! According to George, the contract is worth 52,660,400-assuming receipt of all possible bonuses. After rereading the ernail twice and calling his family, Harry called you to review the terms of the contract and verify George's calculations. After an extended conversation about what. he'll do with his newlound wealth, you ard Harry have agreed that atry funds received could be invested to eam 6.5095, 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 earned in each of the years for which they are avallable 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 tirning of a cash flow alfects the interest rate that is used to discount the cash flow, For example, aninual interest rates should be used to discount annual cash flows, and monthly interest rates are used to discount monthly cash Jlows. Therefore, it may be necessary to compute the appropriate interest rate that should be used in a discounting calculation. - Round all dollar arnounts to the nearest whole doilar and camy 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 sarne values to calculate another answer, do not round. Harry Hurler's Contract Evaluation Worksheet 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the value of Harry's cositract accurate on either a norninal or discounted basis? Check ail that apply. It is appropriate and riecessary to discount the endorsentent contract using the bank account's effective annual interest rate because of differences in the timing of the compounding of the bank account and that of the payrnents on the endorsement contract. George's estirnate of the value of Harry's contract is incorrect on a nominal basis, and the error is $28,088. George's estimate of the nominal value of Harry's contract is correct. Related Question: The Iocal car dealer creating Harry's endorsement opportunity can earn 6 ns (cumpounded quarterly) on his deposited funds. She would have to deposit. each quarter, starting exactly two years before the day Harry signs his contract, to fund her endorsernent. contract. [Note: The future value interest factor of 6% compounded quarterly for eight quarterfy periods is 8.4328. ]
