in the present to see how much each
contract is worth, apples to apples.
You should discount future cash at a
10 percent interest rate.
Steve
Let's work through the first contract
together. How much is the signing
bonus worth today?
Materials on the right have been updated >>>>
$772,650
$924,615
$916,410
$908,205
Offer 1
$916,410 immediate signing bonus
$850,000 at the end of each year for the next 5 years
Offer 2
$208,205 immediate signing bonus
$100,000 at the end of Years 1 through 4
$150,000 at the end of Years 5 through 10
Offer 3
$1,000,000 and the end of Years 11 through 40
$1,003,282 immediate signing bonus
$500,000 at the end of Year 1
$1,000,000 at the end of Year 2
$1,500,000 at the end of Year 3
$2,500,000 at the end of Year 4
$166,410 bonus for any year Luke is selected to play in the Pro Bowl All Star game (25%
probability in each year)
