Correct! The solution is: Offer $1$

$$918,665$ immediate signing bonus

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

Offer $2$

$$209,333$ 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 $3$

$$1,003,733$ 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 $4$

$$168,665$ bonus for any year Luke is selected to play in the Pro Bowl All Star game $(25\%$ probability in each year$)$

Canadian Football League

$$1,118,665$ 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$)$Contract Offers

PV

PV Annuity

$\backslash$table$[[,$Total NPV$],[$Contract $1,4,141,015],[$Contract $2,4,611,325],[$Contract $3,5,251,900],[$Contract $4,5,097,865]]$

$$1,118,665+$$$3,979,200$

$=$$$5,097,865$

Which of the four contracts offers the highest present value?

Incorrect, try again. Hint: compare the total contract values you have calculated

throughout the activity. Refer to the Total Contract Values tab if needed.

Which of the four contracts offers the highest present value?

$$4\mathrm{.}1$ million

$$5\mathrm{.}1$ million

$$4\mathrm{.}6$ million

$$5\mathrm{.}3$ million

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