A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10 percent. 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 listed below: As his advisor, which would you recommend that he accept? 1234Contract 1$3,000,000$3,000,000$3,000,000$3,000,000Contarct 2$2,000,000$3,000,000$4,000,000$5,000,000Contarct 3$7,000,000$1,000,000$1,000,000$1,000,000

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A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10 percent. 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 listed below: As his advisor, which would you recommend that he accept?  1234Contract 1$3,000,000$3,000,000$3,000,000$3,000,000Contarct 2$2,000,000$3,000,000$4,000,000$5,000,000Contarct 3$7,000,000$1,000,000$1,000,000$1,000,000

toroztatG · Accepted Answer

You present value each of the future cash flows to the present to resolve this problem.After a year, the payment is worthX(1+10%)1today.The payment made after 2 year is worth&amp;nbsp;X(1+10%)2&amp;nbsp;today. etc.So, the value of contract 1 is:=$3MM(1.1)+$3MM(1.1)2+$3MM(1.1)3+$3MM(1.1)4=$9,509,596.34&amp;nbsp;Contract 2 = $10,717,847.14&amp;nbsp;Contract 3 = $8,624,410.90.Therefore, the most valuable Contract is 2.&amp;nbsp;

A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10 percent.

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