Question: A creative general manager has offered two different contracts to a vain quarterback. The contracts are shown below: CONTACT A CONTRACT B YEAR SALARY YEAR
A creative general manager has offered two different contracts to a vain quarterback. The contracts are shown below:
| CONTACT A | CONTRACT B | ||
|---|---|---|---|
| YEAR | SALARY | YEAR | SALARY |
| 0 | $517,500.00 | 0 | $307,375.00 |
| 1 | $517,500.00 | 1 | $307,375.00 |
| 2 | $517,500.00 | 2 | $811,300.00 |
| 3 | $517,500.00 | 3 | $811,300.00 |
| 4 | $517,500.00 | 4 | $811,300.00 |
The newspapers report the total dollars of the contract, so contract A will pay a total of $2,587,500.00, while contract B will pay $3,048,650.00. The player will select contract B as it has more publicity. The team can earn 5.00% on their investments, so let's determine the value of each contract.
What is the present value of contract A?
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