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How much better is the second contract for martinez hardy

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Reference no: EM132972698

Martinez Hardy recently rejected a $24,400,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $9,150,000 and annual payments of $3,050,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $26,630,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1 $3,050,000

Year 2 3,130,000

Year 3  3,210,000

Year 4  3,290,000

Year 5  3,580,000

Year 5 balloon payment 10,370,000

Total $26,630,000

Problem 1: 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: EM132972698

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