An NFL defensive lineman has been offered the following contract offers:

Contract A: $1,000,000 signing bonus, $1,000,000 year one salary, $1,100,000 year two salary, $1,200,000 year three salary.

Contract B: $800,000 signing bonus, $900,000 year one salary, $1,000,000 year two salary, $1,100,000 year three salary, $1,200,000 year four salary.

a)What are the face values of the contracts? (2 points)

i)Contact A

ii)Contract B

b)What discount rate would you use to calculate the present value of his contracts? Explain how you decided on the discount rate (3 points).

i)Contract A:

ii)Contract B:

c)What is the present value of his contracts? Show your work (4 points)

i)Contract A:

ii)Contract B:

d)What contract should he accept? (2 points)

Answer rating: 100% (QA)

Part a Face Values i Contract A 1000000 signing bonus 1000000 year one salary 1100000 year two salar... View the full answer