Suppose that current star forward Anthony Davisis currentlyan unrestricted free agent. Suppose that you are his sports agent and are representing Davisin his contract negotiations with two teams: The Los Angeles Lakersand the Portland Trailblazers.

(a) Suppose that the Trailblazers general manager makes the following contract offer: Davis would receive a salary of $15 million this year (2021), a salary of $17 million next year (2022), a salary of $25 million intwo years (2023), and a salary of $28 million in three years (2024). Additionally, Davis would receive a signing bonus of $25 million payable this year (2021).If the current interest rate is 6%, what is the present value of the Trailblazers contract offer?[4Points]

(b) Suppose that the Trailblazers general manager makes the following contract offer:

Davis would receive a salary of $11million this year (2021), a salary of $25million next year (2022), a salary of $35 million in two years (2023), and a salary of $44million in three years (2024). The Lakers would not pay a signing bonus to Davis if he signed with the team.

If the current interest rate is 6%, what is the present value of the Lakers contract offer. Based on your answer from Parts (a) (b), would you recommend that Davissign with the Lakers or the Trailblazers?[6Points]

(c) Suppose the current interest rate is 10% (instead of 6%). Recalculate the present values of the Trailblazer contract and Lakers contract. Does your recommendation change? [8 Points]

(d) Based on your calculations from Parts (a) (c)what is the relationship between interest rates and present value? [2 Points]