When deciding which contract to choose based on highest present value and a 10% discount rate, if billy and his agent think that tax rates are liekly to be higher in the future how might that sway his decision? Contract 1 $900,000 signing bonus $850,000 at the end of each year for the next 5 years Contract 2 $200,000 immediate signing bonus $100,000 at the end of each year for the next five years $150,000 a year at the end of years 5 through 10 $1,000,000 a year at the end of years 11 through 40 Contract 3 $1,000,000 immediate signing bonus $500,000 at the end of year 1 $1,000,000 at the end of year 2 $1,500,000 at the end of year 3 $2,500,000 at the end of year 4 As part of the third offer hhe was also promised a $200,000 bonus for any year in which he was selected to play in the Pro Bowl All Star game. his agent figured there was a 25% probability of that occuring in each of the next 4 years.
When deciding which contract to choose based on highest
Contract 1
$900,000 signing bonus
$850,000 at the end of each year for the next 5 years
Contract 2
$200,000 immediate signing bonus
$100,000 at the end of each year for the next five years
$150,000 a year at the end of years 5 through 10
$1,000,000 a year at the end of years 11 through 40
Contract 3
$1,000,000 immediate signing bonus
$500,000 at the end of year 1
$1,000,000 at the end of year 2
$1,500,000 at the end of year 3
$2,500,000 at the end of year 4
As part of the third offer hhe was also promised a $200,000 bonus for any year in which he was selected to play in the Pro Bowl All Star game. his agent figured there was a 25% probability of that occuring in each of the next 4 years.
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