Question
William Brown, a professional athlete, currently has a contract that will pay him a large amount in the first year of his contract and smaller
William Brown, a professional athlete, currently has a contract that will pay him a large amount in the first year of his contract and smaller amounts thereafter. He and his agent have asked the team to restructure the contract. The team, though reluctant, obliged. William and his agent came up with a counteroffer.
| Year | Current Contract | Team's Offer | Counteroffer | |||
|---|---|---|---|---|---|---|
| 1 | $7,092,000 | $3,475,080 | $4,609,800 | |||
| 2 | $3,645,000 | $3,827,250 | $7,545,150 | |||
| 3 | $2,512,000 | $3,567,040 | $3,366,080 | |||
| 4 | $1,693,000 | $3,639,950 | $2,607,220 |
A.) What is the present values of Current Contract using a 14 percent discount rate? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
B.) What is the present values of Team's Offer using a 14 percent discount rate? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
C.) What is the present values of Counteroffer using a 14 percent discount rate? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
D.) Which of the three contracts has the highest present value?
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The Meaningful Money Handbook
Authors: Pete Matthew
1st Edition
0857196510, 978-0857196514
