Answered step by step
Verified Expert Solution
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%
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started