Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 73

Recently, Matt Ryan, an NFL quarterback, agreed to a five-year, $103.75 million contract extension with the Atlanta Falcons, which made him one of the highest-paid players in professional football history. The contract consisted of a $30 million signing bonus and average annual salary of $20.75 million. The $30 million signing bonus was pro-rated over the course of the contract, in such that $2 million was paid upfront and remaining balance over the five-year contract period. The detail breakdown of the contract is as follows:
(a) How much was the quarterback's contract actually worth at the time of signing (year 2013) Assume that his interest rate is 6%.
(b) For the signing bonus portion, suppose that the quarterback was allowed to take either the pro-rated payment option as just described, or a lump-sum payment option in the amount of $25 million at the time he signed the contract. Should he have taken the lump-sum option instead of the pro-rated one