A rookie of a professional sport is negotiating his first professional contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: Years S 1 2 3 4 d Contract 1 $3,000,000 $3,000,000 $3,000,000 $3,000,000 Contract 2 $2,000,000 $3,000,000 $4,000,000 $5,000,000 Contract 3 $7,000,000 $1,000,000 $1,000,000 $1,000,000 As his adviser, which contract would you recommend that he should accept?
A rookie of a professional sport is negotiating his first professional contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: Years S 1 2 3 4 d Contract 1 $3,000,000 $3,000,000 $3,000,000 $3,000,000 Contract 2 $2,000,000 $3,000,000 $4,000,000 $5,000,000 Contract 3 $7,000,000 $1,000,000 $1,000,000 $1,000,000 As his adviser, which contract would you recommend that he should accept?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A rookie of a professional sport is negotiating his first professional contract. His
has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of
each year. Terms of each contract are as follows:
Years
S 1 2 3 4 d
Contract 1 $3,000,000 $3,000,000 $3,000,000 $3,000,000
Contract 2 $2,000,000 $3,000,000 $4,000,000 $5,000,000
Contract 3 $7,000,000 $1,000,000 $1,000,000 $1,000,000
As his adviser, which contract would you recommend that he should accept?
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