Question: Question Finance (Please answer ASAP with workings) Michael Owens, a professional athlete, currently has a contract that will pay him a large amount in the

Question Finance (Please answer ASAP with workings)

Michael Owens, a professional athlete, currently has a contract that will pay him a large amount in the first year of his contract and smaller amounts thereafter. He and his agent have asked the team to restructure the contract. The team though reluctant but obliged to the request. Michael and his agent came up with a counteroffer. Based on the table given, compute the present values of each contract by using a 14 percent discount rate. Which of the three contracts should be selected by Michael? (8 Marks)

Year /Current Contract /Teams Offer/ Counteroffer

1 / $8,125,000 / $4,000,000 / $5,250,000

2 /$3,650,000 /$3,825,000 / $7,550,000

3 /$2,715,000 / $3,850,000 / $3,625,000

4 / $1,822,250/ $3,925,000 /$2,800,000

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