Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 3: Costly Mistakes Breaking News: Gervon Dexter, while playing for the University of Florida, agreed to pay Big League Advance Fund (BLA) 15%

image text in transcribed

Problem 3: Costly Mistakes Breaking News: Gervon Dexter, while playing for the University of Florida, agreed to pay Big League Advance Fund (BLA) 15% of his pre-tax NFL earnings for the next 25 years in exchange for a one-time payment of $436,485 (read the full story here). Gervon recently signed a four-year contract with the Chicago Bears at 1.68 mil/year, as a second-round draft pick for the NFL. Assume that Gervon received the BLA payment and signed the NFL contract simultaneously", while interest rates were at 5% for every maturity (assume annual payments from NFL with annual compounding). 1. Estimate the present value of Gervon's mistake if he does not sign any other NFL contract ever again (i.e., that is benefits minus costs). 2. Estimate the present value of Gervon's mistake, if he becomes something like the Lebron of NFL. That is, if he plays for 25 seasons extending his current contract with the same terms (at $ 1.68 mil/year).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert Hughes, Melissa Hart

14th Edition

1264101597, 9781264101597

More Books

Students also viewed these Finance questions

Question

Describe major criticisms of Freuds system of thought.

Answered: 1 week ago

Question

Describe ERP and how it can create efficiency within a business

Answered: 1 week ago