Which offer would you advice the pitcher to accept

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Reference no: EM132196899

Question: Suppose you are the agent for a baseball pitcher. Suppose he is offered the following contract by the New York Yankees: a signing bonus of $3,000,000 (to be received immediately), a first year's salary of $6,000,000 (to be received one year from today), a second year's salary of $7,000,000 (to be received two years from today), and a third year's salary of $8,000,000 (to be received three years from today). Suppose he is also offered the following contract by the San Francisco Giants: a signing bonus of $6,000,000, a first year's salary of $5,500,000, and a third year's salary of $6,000,000. If you believe the relevant discount rate is 10%, which offer would you advice the pitcher to accept? Would your advice change if you believed the relevant discount rate were 5%?

Reference no: EM132196899

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