Reference no: EM132267383

Josh, a professional tennis player, was offered a contract from a major sponsor recently. The existing contract will make a large amount of payment in the first year and smaller amounts thereafter. Taking advice from his agent, Josh decided to ask his team to provide an alternative offer while he also makes his own counter offer based on your advice. Josh needs to finalise his contract today. Assuming an interest rate of 10%, which of the three contracts has the best value?

Year existing contract team's offer Josh's offer

1 815,000 402,500 527,500

2 367,500 385,000 757,500

3 274,000 385,000 365,000

4 184,725 395,000 282,500

5 184,725 395,000 252,500