A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 6%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: Year Contract A $1,200,000 $1,250,000 $1,250,000 $1,000,000 Contract B $500,000 $750,000 $750,000 $3,000,000 Contract C $1,500,000 $1,500,000 $750,000 $750,000 Contract A Contract B Contract C 1 Pick any contract! 2 As his adviser, which contract would you recommend that he accept? 3 4

A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 6%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: Year Contract A $1,200,000 $1,250,000 $1,250,000 $1,000,000 Contract B $500,000 $750,000 $750,000 $3,000,000 Contract C $1,500,000 $1,500,000 $750,000 $750,000 Contract A Contract B Contract C 1 Pick any contract! 2 As his adviser, which contract would you recommend that he accept? 3 4

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are negotiating a sports contract for your client. The client’s opportunity cost (interest rate) is 9%. He has been offered two possible 4 year contracts. Payments are guaranteed and will be made at the end of each year. The terms of each contract are as follows: Which contract will you choose? (Ch. 5) Year 1 Year 2 Year 3 Year 4 Contract 1 4,500,000 4,500,000 4,500,000 4,500,000 Contract 2 22,000,000 Group of answer choices Contract 1 Contract 2
You are negotiating a sports contract for your client. The client’s opportunity cost (interest rate) is 9.00%. She has been offered two possible 4 year contracts. Payments are guaranteed and will be made at the end of each year. The terms of each contract are shown below. Which contract should you advise your client to choose? Contract # Year 1 Year 2 Year 3 Year 4 Contract 1 5,000,000 5,000,000 5,000,000 5,000,000 Contract 2 0 0 0 22,000,000 Group of answer choices Contract 2 Both contracts have the exact same value Contract 1
A basketball player is offered the following contract today, Jan. 1, 2020: $2 million immediately, $2.40 million in 2020, $2.90 million in 2021, $3.60 million in 2022, and $3.80 million in 2023. Assume all payments other than the first $2 million are paid at the end of the year. If the appropriate discount rate is 10 percent per year, what is the present value of the deal? Please show in Excel
A famous quarterback just signed a $12.8 million contract providing $3.2 million a year for 4 years. A less famous receiver signed a $11.8 million 4 year contact providing $3 million now and $2.4 million a year for 4 years . The interest rate is 8%.what is th PV of the quarterback's contract? what is the PV of the receiver's contract?
The Ginebra San Miguel convince Stephen Curry to play for the basketball franchise for three seasons. They offer the player P1 million in year 1, P2.5 million in year 2, and P3 million in year 3. Assuming end of year payments of the proceeds of the contract, how would we find the value of his contract today if the player has a discount rate of 12%, compounding semi-annually?
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.
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h If she expects to earn 8% annually, which is the best choice? - If she expects to earn 9% annually, which option would you recommend? d Explain how interest rates influence the optimal choice. Problem 6 PV OF A CASH FLOW STREAM. A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: 1 2 3. +- 十 +一 - Contract 1 $3,000,000 $3,000,000 $3,000,000 $3,000,000 Contract 2 $2,000,000 $3,000,000 $4,000,000 $5,000,000 Contract 3 $7,000,000 $1,000,000 $1,000,000 $1,000,000 As his adviser, which contract would you recommend that he accept? Problem 7 EFFECTIVE VERSUS NOMINAL INTEREST RATES. Bank A pays 4% inte Compounded annually on deposits, while Bank B pays 3.5% compounded daily.
A sports star can sign a 6-year contract that starts at $12M with increases of $3M each year for his expected playing career of 6 years. It is also possible to sign a contract that starts at $8M for the first year and then increases at $2M each year for 10 years If his interest rate for the time value of money is 8%, what is the value of each choice?

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