PROBLEM 9-1. Present Value Analysis. James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $7,500,000 and annual payments of $2,500,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $22,000,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1	$2,500,000
Year 2	$2,600,000
Year 3	$2,700,000
Year 4	$2,800,000
Year 5	$2,900,000
Year 5 balloon payment	$8,500,000
Total	$22,000,000

Required

Suppose you are Hardys agent and you wish to evaluate the two contracts using a required rate of return of 15 percent. In present value terms, how much better is the second contract?