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Q mework 3 ck to Assignment Attempts Keep the Highest/3 7. Application of Time Value of Money Skills Colin Closer 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 Dodge City Cowboys; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 97 mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a 17-3 win-loss record, an earned run average (ERA) of 2.84, and 108 strikeouts in 123.1 Innings pitched. He is also your best friend. Two weeks ago, on his three-year anniversary with the team, Colin received the following email from his agent, Michael Make-d Team, indicating that he is being called up to the Wichita Wizards, the Cowboys's corresponding Major League Baseball (MLB) team. Moreover, Colin's contract is being revised to reflect his new status. The email describes the general terms and conditions of Colin's revised contract. From: Michael Maked Team To: Colin Closer mework 3 From: Michael Maked Team To: Colin Closer Subject: New Team, New Contract Proposal Colin, Congratulations! You've been called up to the Wichita Wizards. Below are the offered Colin is so excited. According to Michael, the contract lo worth $2,758,400 auming receipt of all possible bonuses. After reading the email twice and calling his family, Colin called you to review the terms of the contract and verify Michael's Calculations. After an extended conversation about what he'll do with his newfound wealth, you and Colin have agreed that any funds received could be invested to earn 0.00%, 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 clarify possible sources of confusion and simplify your calculations 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), unless specifically stated differently. Their value should be based on the salary in effect at the time the bonuses were earned The needs are nald in accordance with the terms of the deal Q Sear mework 3 we'll do with his newfound wealth, you and Colin have agreed that any funds received could be invested to earn 9.00%, 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 darity possible sources of confusion and simplify your calculations: 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. Colin Closer's Contract Evaluation Worksheet B D 1 E F Assumptions and Calculated Values 2 Bank Rate Information: 3 90 Colin's Bank Account Rate (compounded monthly Monthly Bank Rate Effective Annual Interest 11 5 6 Year 1 Year 2 Year 3 Year Total wale 5 S 5 IS 7 Salary and Bonus Information Annual Stary (% COLA) 9 Monthly Salary 10 Decont factor (based on Cell above) 11 Discounted Annual salary 12 13 Time-League Ron 14 Discount factor (based on 11:19 10.4542 9.557 0,9502 nework 3 2 Year 1 Year 2 Year 3 Year 3 Salary and Bonus Information: Annual Salary (4% COLA) Year 4 Total value 8 S $ 9 Monthly Salary IS $ 11.4349 S 10 10.4512 9.5577 8.7380 Discount factor (based on Cell B4 above) Discounted Annual Salary 11 12 13 14 Time-in-League Bonus Discount factor (based on Cell B4 above) Discounted Time in League 0.9562 15 Bonus 16 17 $ 5 18 0.9142 0.83 0.7641 Milestone Bonus Discount factor (based on Cell 5 above) Discounted Mesto Bonus 19 $ 20 21 Performance Homework 3 21 22 Performance Bonus Discount factor (based on Cell B5 above) 0.9142 0.8358 0.7641 0.6986 23 s Discounted Performance Bonus 24 25 Monthly Endorsement $ $ 26 11.4349 10.4542 Contract Payment Discount factor (baned on Cell 4 above) Discounted Monthly Endorsement Payment 27 5 28 29 Contract's Total Nominal Value Contract Total Discounted Value 30 1. Give your worksheet calculations, which of the following sements is accurate is Michaestimate the value ocorra accurate either a nominal discounted bani Check all that apply. m. warmint the performance bonusing the bank 3 29 Contract's Total Nominal Value 30 Contract's Total Discounted Valve 1. Given your worksheet calculations, which of the following statements is accurate? Is Michad's estimate of the value of Colin's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate 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. On appropriate and necessary to discount the endorsement 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 payments on the endorsement contract. Michaels estimate of the nominal value of Colin's contract is correct Related Question: The local car dealer creating Collins endorsement opportunity can earn on (compounded quarterly) on his departadtrunde. She would have to deposits each quarter, starting exactly two years before the day Collinson Ns contract, tu fund her endorsement contract. (Note: The future value interest factor of the compounded quarterly for eight quarterly periods 8.428. Grade It Now Save A continue Q mework 3 ck to Assignment Attempts Keep the Highest/3 7. Application of Time Value of Money Skills Colin Closer 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 Dodge City Cowboys; last year, he was the first runner-up for the Minor League Player of the Year award. Using his 97 mph fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a 17-3 win-loss record, an earned run average (ERA) of 2.84, and 108 strikeouts in 123.1 Innings pitched. He is also your best friend. Two weeks ago, on his three-year anniversary with the team, Colin received the following email from his agent, Michael Make-d Team, indicating that he is being called up to the Wichita Wizards, the Cowboys's corresponding Major League Baseball (MLB) team. Moreover, Colin's contract is being revised to reflect his new status. The email describes the general terms and conditions of Colin's revised contract. From: Michael Maked Team To: Colin Closer mework 3 From: Michael Maked Team To: Colin Closer Subject: New Team, New Contract Proposal Colin, Congratulations! You've been called up to the Wichita Wizards. Below are the offered Colin is so excited. According to Michael, the contract lo worth $2,758,400 auming receipt of all possible bonuses. After reading the email twice and calling his family, Colin called you to review the terms of the contract and verify Michael's Calculations. After an extended conversation about what he'll do with his newfound wealth, you and Colin have agreed that any funds received could be invested to earn 0.00%, 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 clarify possible sources of confusion and simplify your calculations 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), unless specifically stated differently. Their value should be based on the salary in effect at the time the bonuses were earned The needs are nald in accordance with the terms of the deal Q Sear mework 3 we'll do with his newfound wealth, you and Colin have agreed that any funds received could be invested to earn 9.00%, 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 darity possible sources of confusion and simplify your calculations: 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. Colin Closer's Contract Evaluation Worksheet B D 1 E F Assumptions and Calculated Values 2 Bank Rate Information: 3 90 Colin's Bank Account Rate (compounded monthly Monthly Bank Rate Effective Annual Interest 11 5 6 Year 1 Year 2 Year 3 Year Total wale 5 S 5 IS 7 Salary and Bonus Information Annual Stary (% COLA) 9 Monthly Salary 10 Decont factor (based on Cell above) 11 Discounted Annual salary 12 13 Time-League Ron 14 Discount factor (based on 11:19 10.4542 9.557 0,9502 nework 3 2 Year 1 Year 2 Year 3 Year 3 Salary and Bonus Information: Annual Salary (4% COLA) Year 4 Total value 8 S $ 9 Monthly Salary IS $ 11.4349 S 10 10.4512 9.5577 8.7380 Discount factor (based on Cell B4 above) Discounted Annual Salary 11 12 13 14 Time-in-League Bonus Discount factor (based on Cell B4 above) Discounted Time in League 0.9562 15 Bonus 16 17 $ 5 18 0.9142 0.83 0.7641 Milestone Bonus Discount factor (based on Cell 5 above) Discounted Mesto Bonus 19 $ 20 21 Performance Homework 3 21 22 Performance Bonus Discount factor (based on Cell B5 above) 0.9142 0.8358 0.7641 0.6986 23 s Discounted Performance Bonus 24 25 Monthly Endorsement $ $ 26 11.4349 10.4542 Contract Payment Discount factor (baned on Cell 4 above) Discounted Monthly Endorsement Payment 27 5 28 29 Contract's Total Nominal Value Contract Total Discounted Value 30 1. Give your worksheet calculations, which of the following sements is accurate is Michaestimate the value ocorra accurate either a nominal discounted bani Check all that apply. m. warmint the performance bonusing the bank 3 29 Contract's Total Nominal Value 30 Contract's Total Discounted Valve 1. Given your worksheet calculations, which of the following statements is accurate? Is Michad's estimate of the value of Colin's contract accurate on either a nominal or discounted basis? Check all that apply. It is appropriate 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. On appropriate and necessary to discount the endorsement 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 payments on the endorsement contract. Michaels estimate of the nominal value of Colin's contract is correct Related Question: The local car dealer creating Collins endorsement opportunity can earn on (compounded quarterly) on his departadtrunde. She would have to deposits each quarter, starting exactly two years before the day Collinson Ns contract, tu fund her endorsement contract. (Note: The future value interest factor of the compounded quarterly for eight quarterly periods 8.428. Grade It Now Save A continue