Last season, Harry was a starting pitcher for a double$-$A $($AA$)-$level baseball team, the Moab Mountain Goats; last year, he was the first runner$-$up for the Minor League Player of the Year award. Using his $93$ mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a $15-2$ win$$loss record, an earned run average $($ERA$)$ of $2\mathrm{.}76,$ and $123$ strikeouts in $99\mathrm{.}1$ innings pitched. Two weeks ago, on his three$-$year anniversary with the team, Harry received the following email from his agent, Marty Fineprint, indicating that he is being called up to the Mobile Bayhoppers, the Mountain Goats$$s corresponding Major League Baseball $($MLB$)$ 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 Hurler hereafter referred to as the $$Player$,$ is offered a four$-$year contract with an annual salary of $$474,000$ per year, to be paid at the end of each month in the contract term.

Under the league$$s collective bargaining agreement, the Player will receive a $4\%$ cost$-$of$-$living adjustment $($COLA$)$ to his annual salary at the beginning of every other year. This means that the Player$$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 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 $$150,000$ bonus if he ties Nolan Ryan$$s $1973$ single$-$season strikeout record $(383$ strikeouts$)$

The Player is offered a performance$-$based bonus, as well as a milestone bonus. Both are intended to encourage outstanding performance

The 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 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. 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 Bayhoppers, I$$ve also been able to secure the following endorsement opportunity:

A local car dealer has offered you a contract that will pay $$3,000$ per month for two years. This contract is contingent on your accepting the contract with the Bayhoppers and will take effect immediately upon signing your MLB contract

the contract is worth $$2,840,400$assuming receipt of all possible bonuses. After rereading the email twice and calling his family. After an extended conversation about what he$$ll do with his newfound wealth, you and Harry have agreed that any funds received could be invested to earn $8\mathrm{.}00\%,$ compounded monthly.

Contract Evaluation Worksheet

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.