The contract offer called for an immediate signing bonus of

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Reference no: EM13483973

ames Hardy recently rejected a $20,000,000 five year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $7,500,000 and annual payments of $2,500,000. 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 $2,500,000

Year 2 2,600,000

Year 3 2,700,000

Year 4 2,800,000

Year 5 2,900,000

Year 5 baloon payment 8,500,000

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 15 percent. In present value terms, how much better is the second contract?

Reference no: EM13483973

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