Landon Lowman, the 20-year-old star quarterback of the university football team, is approached about skipping his last two years of college and entering the professional football draft. Landon expects that his football career will be over by the time he is 32 years old. Talent scouts estimate that Landon could receive a signing bonus of $1 million today, along with a five-year contract for $3 million per year (payable at the end of each year). They further estimate that he could negotiate a contract for $5 million per year for the remaining seven years of his career. The scouts believe, however, that Landon will be a much higher draft pick if he improves by playing two more years of college football. If he stays at the university, he is expected to receive a $2 million signing bonus in two years, along with a five-year contract for $5 million per year. After that, the scouts expect Landon to obtain a five-year contract for $6 million per year to take him into retirement. Assume that Landon can earn a 10% return over this time. Should Landon stay or go?
Answer to relevant QuestionsMatt Sedgwick, facilities and operations manager for the Birmingham Buffalo professional football team has come up with an idea for generating income. Matt wants to expand the stadium by building skyboxes sold with lifetime ...Hector Garcia has shopped around for the best interest rates for his investment of $10,000 over the next year. He has found the following: Stated Rate Compounding 6.10%........................................ ...Craig and LaDonna Allen are trying to establish a college fund for their son Spencer, who just turned three today. They plan for Spencer to withdraw $10,000 on his eighteenth birthday and $11,000, $12,000, and $15,000 on his ...What is the difference between a pure discount bond and a bond that trades at a discount? If issuers successfully sell pure discount bonds in the market, investors must want them. Can you explain why any bond purchaser might ...Calculate the price of a 5-year, $1,000 par value bond that makes semiannual payments, has a coupon rate of 8 %, and offers a yield to maturity of 7 %. Recalculate the price assuming a 9 % YTM. What is the general ...
Post your question