Steve Hawke is a football star who has been offered contracts by two different teams.The payments (in millions of dollars) under the two contracts are shown below: $\begin{array}{lcc}
&\text { Team A}&\text { Team B}\
\text { Year } & \text { Cash Payment }& \text { Cash Payment } \
\hline & \$ 8.0 & \$ 2.5 \
1 & 4.0 & 4.0 \
2 & 4.0 & 4.0 \
3 & 4.0 & 8.0 \
4 & 4.0 & 8.0
\end{array}$ Steve plans to accept the contract that provides him with the highest NPV.At what discount rate would he be indifferent between the two contracts?
A)10.85%
B)11.35%
C)12.66%
D)13.98%

Question

Steve Hawke is a football star who has been offered contracts by two different teams.The payments (in millions of dollars) under the two contracts are shown below:​​​ $\begin{array}{lcc}
&\text { Team A}&\text { Team B}\
\text { Year } & \text { Cash Payment }& \text { Cash Payment } \
\hline & \$ 8.0 & \$ 2.5 \
1 & 4.0 & 4.0 \
2 & 4.0 & 4.0 \
3 & 4.0 & 8.0 \
4 & 4.0 & 8.0
\end{array}$ ​Steve plans to accept the contract that provides him with the highest NPV.At what discount rate would he be indifferent between the two contracts?
A)10.85%
B)11.35%
C)12.66%
D)13.98%

Quizplus · Accepted Answer

The Answer of Steve Hawke is a football star who has been offered contracts by two different teams.The payments (in millions of dollars) under the two contracts are shown below:​​​ $\begin{array}{lcc}
&\text { Team A}&\text { Team B}\
\text { Year } & \text { Cash Payment }& \text { Cash Payment } \
\hline & \$ 8.0 & \$ 2.5 \
1 & 4.0 & 4.0 \
2 & 4.0 & 4.0 \
3 & 4.0 & 8.0 \
4 & 4.0 & 8.0
\end{array}$ ​Steve plans to accept the contract that provides him with the highest NPV.At what discount rate would he be indifferent between the two contracts?
A)10.85%
B)11.35%
C)12.66%
D)13.98%

Steve Hawke Is a Football Star Who Has Been Offered