Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evaluating
Question:
Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evaluating three contract options. Each option offers a signing bonus and a series of payments over the life of the contract. Fisheruses a 10.25 percent rate of return to evaluate the contracts. Given the cash flows for each option, which one should he choose?
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Year Cash Flow Type Signing Bonus Annual Salary Annual Salary Annual Salary Annual Salary Annual Salary Annual Salary Option A Option B Option C S3,100.000 S4,000,000 S4,250,000 S 650,000 S 825,000 S 550,000 S 715,000 S 850,000 S625,000 S 822,250 S925,000 S 800,000 S 975,000 S1,250,000 S 900,000 $1,100,000 $1,250,000 $1,000,000
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1118845899
3rd edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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