Segment 3C Q1

Critical Thinking Questions:

Part 1

Present Value [LO1] If you were an athlete negotiating a contract, would you want a big signing bonus payable immediately and smaller payments in the future, or vice versa? How about looking at it from the team's perspective?

Part 2

Present Value [LO1] Suppose two athletes sign 10-year contracts for $80 million. In one case, were told that the $80 million will be paid in 10 equal installments. In the other case, were told that the $80 million will be paid in 10 installments, but the installments will increase by 5 percent per year. Who got the better deal?