Contract Offers

Materials

Let's work through the first contract together. How much is the signing bonus worth today?

Luke

$$960,503$

Hint: The signing bonus is received immediately and does not need to be discounted back to the present.

Steve

Let's work through the first contract together. How much is the signing bonus worth today?

$$940,335$

$$920,168$

$$772,650$

Submit

Offer $1$

$$940,335$ immediate signing bonus

$$850,000$ at the end of each year for the next $5$ years

Offer $2$

$$220,168$ immediate signing bonus

$$100,000$ at the end of Years $1$ through $4$

$$150,000$ at the end of Years $5$ through $10$

$$1,000,000$ and the end of Years $11$ through $40$

Offer $3$

$$1,008,067$ immediate signing bonus

$$500,000$ at the end of Year $1$

$$1,000,000$ at the end of Year $2$

$$1,500,000$ at the end of Year $3$

$$2,500,000$ at the end of Year $4$

$$190,335$ bonus for any year Luke is selected to play in the Pro Bowl All Star game $(25\%$ probability in each

I year$)$

Canadian Football League

$$1,140,335$ immediate signing bonus

$$2,000,000$ at the end of Years $1$ through $3$

Only signing bonus is guaranteed $(80\%$ probability of being on team each year$)$