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SHOW HOW TO DO IT ON A FINANCIAL CALCULATOR (BA II PLUS) Steve Hawke is a football star who has been offered contracts by two
SHOW HOW TO DO IT ON A FINANCIAL CALCULATOR (BA II PLUS)
Steve Hawke is a football star who has been offered contracts by two different teams. The payments (in millions of dollars) under the two contracts are shown below: Team A Team B Year Cash Payment Cash Payment 0 $8.0 $2.5 1 4.0 4.0 2 4.0 4.0 3 4.0 8.0 4 4.0 8.0 Steve plans to accept the contract that provides him with the highest NPV. At what discount rate would he be indifferent between the two contracts? a. 10.85 % b. 11.35% c. 12.66 % d. 13.98 %
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