Solution-Evaluate the two contracts using a required rate

Evaluate the two contracts using a required rate of return

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Reference no: EM132856322

Question - Novak Hardy recently rejected a $20,400,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $7,650,000 and annual payments of $2,550,000.

To sweeten the deal, the president of player personnel for the Seals has now offered a $22,330,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1 $2,550,000

Year 2 2,630,000

Year 3 2,710,000

Year 4 2,790,000

Year 5 2,980,000

Year 5 balloon payment 8,670,000

Total $22,330,000

Suppose you are Hardy's 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?

Reference no: EM132856322

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Evaluate the two contracts using a required rate of return

Reference no: EM132856322

Reference no: EM132856322

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