Gerson Dexter, while playing for the University of Florida, agreed to pay Big League Advance Fund (BLA)
Question:
Gerson Dexter, while playing for the University of Florida, agreed to pay Big League Advance Fund (BLA) 15% of his pre-tax NFL earnings for the next 25 years in exchange for a one-time payment of $436,485. Gervon recently signed a four-year contract with the Chicago Bears at 1.68 mil/year, as a second-round draft pick for the NFL. Assume that Gervon received the BLA payment and signed the NFL contract simultaneously∗ , while interest rates were at 5% for every maturity (assume annual payments from NFL with annual compounding).
1. Estimate the present value of Gervon’s mistake if he does not sign any other NFL contract ever again (i.e., that is benefits minus costs).
2. Estimate the present value of Gervon’s mistake, if he becomes something like the Lebron of NFL. That is, if he plays for 25 seasons extending his current contract with the same terms (at $ 1.68 mil/year)
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell