Pearl Hardy recently rejected a $21,200,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $7,950,000 and annual payments of $2,650,000. To sweeten the deal, the president of the player personnel for the Seal has now offered a $23,190,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of 15 percent. 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 contract ___________.

Present value of new contract ____________.

In present value terms, the second contract is (better / not better) than the old one.

\begin{tabular}{lr} Year 1 & $2,650,000 \\ Year 2 & 2,730,000 \\ Year 3 & 2,810,000 \\ Year 4 & 2,890,000 \\ Year 5 & 3,100,000 \\ Year 5 balloon payment & 9,010,000 \\ \cline { 2 } Total & $23,190,000 \\ \hline \hline \end{tabular}