I need help with a Contract Evaluation Worksheet

Saleem Swingman 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 double-A (AA)-level baseball team, the Roswell Extraterrestrials; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 93mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a 15 -2 win-loss record, an earned run average (ERA) of 2.76, and 123 strikeouts in 99.1 innings pitched. He is also your best friend. Two weeks ago, on his three-year anniversary with the team, Saleem received the foliowing email from his agent, George Get-d'Bucks, indicating that he is being. called up to the Springfleld Dusties, the Extraterrestrials's corresponding Major League Baseball (MLB) team. Moreover, Saleem's contract is being revised to reflect his new status. The email describes the general terms and conditions of Saleem's revised contract. Saleem is so excitedl According to George, the contract is worth $2,916,400-assuming receipt of all possible bonuses. After rereading the email twice and calling his family, Saleem called you to revlew the terms of the contract and verify George's calculations. After an extended conversation about what he'll do with his newfound wealth, you and Saleem have agreed that any funds received could be invested to earn 6.00%, compounded monthly. Contract Evaluation Worksheet Complete the following worksheet by inserting the oppropriate values to evaluate the contract and answer the related questions. Note: To ciarify possible sources of confusion and simplify your calculations: - Assume that al bonuses are eamed in each of the years for which they are availabie and are paid at the end of the corresponding. year(s), uniess specifcally 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 fow. 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 moy be necessary to compute the appropriate interest rate that should be used in a discounting caiculation. - Round ail 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. Saleem Swingman's Contract Evaluation Worksheet 1. Assumptions and Calculated Values 2. Bank Rate Informationt 3. Saleem's Bank Account Rate (compounded monthly) 4 Monthly Bank Rate 5 Effective Annual Interest Rate 6 7. Salary and Bonus Information: Year 1 Year 2 Year 4 Total value 8 Annual Salary (4\%, COLA) 9 Monthly Salary. 10. Discount factor (based on Cell B4 above) 11 Discounted Annual Salary 12 13 Time-in-League Bonus 14 Discount factor (based on 0.9705 Cell B4 above) 15 Discounted Time-in-League Bonus 16 17. Milestone Bonus: 18 Discount factor (based on 5 9.709301543560 5 5 5 Ceuliasabowed. 1. Given your worksheet calculotions, which of the following statements is accurate? Is George's estimate of the value of Saleem's contract accurate. on either a nominal or discounted basis? Check all that apply. 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the value of 5 aleem's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate and necessary to discount the endorsement contract using the bank account's effective annual interest rate because of diferences in the timing of the compounding of the bank account and that of the payments on the endorsement contract. It is approprlate 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 bank account and that of the payments for the performance bonus. George's estimate of the nominal value of Saleem's contract is correct. Related Question: The local car dealer creating Saleem's endorsement opportunity can earn 6% (compounded quarterly) on his deposited funds. She Would have to deposit each quarter, starting exactly two years before the day 5 aleem signs his contract, to fund her endorsement contract. [Note: The future value interest factor of 6% compounded quarterly for eight quarterty periods is 8.4328. ] Saleem Swingman 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 double-A (AA)-level baseball team, the Roswell Extraterrestrials; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 93mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a 15 -2 win-loss record, an earned run average (ERA) of 2.76, and 123 strikeouts in 99.1 innings pitched. He is also your best friend. Two weeks ago, on his three-year anniversary with the team, Saleem received the foliowing email from his agent, George Get-d'Bucks, indicating that he is being. called up to the Springfleld Dusties, the Extraterrestrials's corresponding Major League Baseball (MLB) team. Moreover, Saleem's contract is being revised to reflect his new status. The email describes the general terms and conditions of Saleem's revised contract. Saleem is so excitedl According to George, the contract is worth $2,916,400-assuming receipt of all possible bonuses. After rereading the email twice and calling his family, Saleem called you to revlew the terms of the contract and verify George's calculations. After an extended conversation about what he'll do with his newfound wealth, you and Saleem have agreed that any funds received could be invested to earn 6.00%, compounded monthly. Contract Evaluation Worksheet Complete the following worksheet by inserting the oppropriate values to evaluate the contract and answer the related questions. Note: To ciarify possible sources of confusion and simplify your calculations: - Assume that al bonuses are eamed in each of the years for which they are availabie and are paid at the end of the corresponding. year(s), uniess specifcally 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 fow. 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 moy be necessary to compute the appropriate interest rate that should be used in a discounting caiculation. - Round ail 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. Saleem Swingman's Contract Evaluation Worksheet 1. Assumptions and Calculated Values 2. Bank Rate Informationt 3. Saleem's Bank Account Rate (compounded monthly) 4 Monthly Bank Rate 5 Effective Annual Interest Rate 6 7. Salary and Bonus Information: Year 1 Year 2 Year 4 Total value 8 Annual Salary (4\%, COLA) 9 Monthly Salary. 10. Discount factor (based on Cell B4 above) 11 Discounted Annual Salary 12 13 Time-in-League Bonus 14 Discount factor (based on 0.9705 Cell B4 above) 15 Discounted Time-in-League Bonus 16 17. Milestone Bonus: 18 Discount factor (based on 5 9.709301543560 5 5 5 Ceuliasabowed. 1. Given your worksheet calculotions, which of the following statements is accurate? Is George's estimate of the value of Saleem's contract accurate. on either a nominal or discounted basis? Check all that apply. 1. Given your worksheet calculations, which of the following statements is accurate? Is George's estimate of the value of 5 aleem's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate and necessary to discount the endorsement contract using the bank account's effective annual interest rate because of diferences in the timing of the compounding of the bank account and that of the payments on the endorsement contract. It is approprlate 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 bank account and that of the payments for the performance bonus. George's estimate of the nominal value of Saleem's contract is correct. Related Question: The local car dealer creating Saleem's endorsement opportunity can earn 6% (compounded quarterly) on his deposited funds. She Would have to deposit each quarter, starting exactly two years before the day 5 aleem signs his contract, to fund her endorsement contract. [Note: The future value interest factor of 6% compounded quarterly for eight quarterty periods is 8.4328. ]