VaughnHardy recently rejected an $18,000,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $6,750,000and annual payments of $2,250,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $19,750,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1 $2,250,000

Year 2 2,330,000

Year 3 2,410,000

Year 4 2,490,000

Year 5 2,620,000

Year 5 balloon payment 7,650,000

Total $19,750,000

Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of15percent. In present value terms, how much better is the second contract?(Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answers to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Present value of the old contract. .

Present value of the new contract. .

In present value terms, the second contract isbetter or not better

than the old one.