Reference no: EM132632343

An NHL hockey player is offered the choice of two 4-year salary contracts, contract X for $2.85 million and contract Y for $2.72 million:

                                             Contract X                          Contract Y

End of year 1                     $ 250,000                    $ 550,000

End of year 2                          750,000                     820,000

End of year 3                          850,000                      650,000

End of year 4                           1,000,000                  700,000

Total                                         $2,850,000                 $2,720,000

Problem 1: Which contract has the higher PV at 16% compounded annually?