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What rate of return would martin be indifferent

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Reference no: EM132595087

Martin Fillmore is a big basketball star who has been offered contracts by Boston Celtics and Miami Heat. The payment (in millions of dollars) he receives under the 2 contracts are listed below:

                       Year               Boston Celtics            Miami Heat

                       0                     $18,000,000               $12,500,000

                       1                      14,000,000                14,000,000   

                       2                      14,000,000                14,000,000

                       3                      14,000,000                18,000,000

                       4                      14,000,000                18,000,000

Martin is committed to accepting the contract which provides him with the highest value (i.e., NPV). At what rate of return would Martin be indifferent between the teams?

  1. 10.85%
  2. 11.35%
  3. 16.49%
  4. 19.67%
  5. 21.03%

Reference no: EM132595087

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