Solution-Evaluate the contracts using a required rate of

Evaluate the contracts using a required rate of return

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Reference no: EM13522429

James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals. The contract offer called for an immediate signing bonus of $5,000,000 and annual payments of $3,000,000. 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 $ 3,000,000

Year 2 3,100,000

Year 3 3,200,000

Year 4 3,300,000

Year 5 3,400,000

Year 5 balloon payment 6,000,000

Total $22,000,000

Required

Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?

Reference no: EM13522429

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Evaluate the contracts using a required rate of return

Reference no: EM13522429

Reference no: EM13522429

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