MartinezHardy recently rejected a $24,400,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $9,150,000and annual payments of $3,050,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $26,630,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1$3,050,000Year 23,130,000Year 33,210,000Year 43,290,000Year 53,580,000Year 5 balloon payment10,370,000Total$26,630,000

Click here to view factor tables

Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of15percent. In present value terms, how much better is the second contract?(Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answers to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Present value of old contractenter a dollar amount

Present value of new contractenter a dollar amount

In present value terms, the second contract is

select an option

betternot better

than the old one.

Save for Later