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liberstina [14]
3 years ago
9

A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-ye

ar contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows: 1 2 3 4 Contract 1 $3,000,000 $3,000,000 $3,000,000 $3,000,000 Contract 2 $2,500,000 $3,000,000 $4,000,000 $5,000,000 Contract 3 $7,000,000 $1,500,000 $1,500,000 $1,500,000 As his advisor, which contract would you recommend that he accept?
Business
1 answer:
Sati [7]3 years ago
6 0

Answer:

Contract 3 has the higher present value. Therefore, it is the most convinient.

Explanation:

Giving the following information:

His opportunity cost is 10%.

Contract 1

$3,000,000

$3,000,000

$3,000,000

$3,000,000

Contract 2

$2,500,000

$3,000,000

$4,000,000

$5,000,000

Contract 3

$7,000,000

$1,500,000

$1,500,000

$1,500,000

We need to find the present value of each contract to compare.

PV= CF/(1+i)^

CF= cash flow

Contract 1:

PV= 3,000,000/(1.10) + 3,000,000/(1.10^2) + 3,000,000/(1.10^3) + 3,000,000/(1.10^4)

PV= $9,509,596.34

Contract 2:

PV= $11,172,392.6

Contract 3:

PV= $9,754,798.17

You might be interested in
Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer.
34kurt

Answer:

See below.

Explanation:

Lets first calculate inflation using the formula for Consumer Price Index

Inflation for a good = (Year 2 price - Year 1 price / Year 1 price) * 100

Using the above formula we can calculate inflation when Beans = $2 and Rice = $6.

Inflation for Beans = (2-1/1) * 100 = 100%

Inflation for Rice = (6-3/3) * 100 = 100%

Since each of them use rice and beans in equal proportions we assign them weights of 0.5 each,

Inflation Total = 0.5 * 100 + 0.5 * 100 = 100%

We assume Bob and Rita form a transnational relation and as such neither is worse off because the exchange rate between them remains the same,

Exchange rate before inflation = 3/1 = 3, Bob can buy 1 Rice by selling Rita 3 Beans.

Exchange rate after inflation = 6/2 = 3, so Bob can still buy 1 Rice by selling Rita 3 Beans.

B) For Prices 2 and 4 we use the above formulas,

Total Inflation = (2-1/1)*100*0.50 + (4-3/3)*100*0.50 = 66.66%

Bob is better off and Rita Worse off as the exchange rate for Bob has improved He can acquire 1 Rice for 4/2 = 2 Beans instead of 3 he needed before. Rita needs to sell him more to maintain her consumption but since they always consume same amount, she is worse off.

C) For Prices 2 and 1.5.

Total Inflation = (2-1/1)*100*0.50 + (1.5-3/3)*100*0.50 = (50-25) = 25%

Bob is now worse off and Rita better off as the Exchange rate change has favored Rita. Rita now only needs to sell 1 rice to obtain 2/1.5 = 1.3 units of Beans. Bob will have to sell more to maintain his initial consumption level.

D)

Bob and Rita are more concerned with their rate of exchange which is the change in real terms. As long as the changes are proportional and there are no third actors in the economy model, the 2 agents are not affected at all. What matters to them is their transnational rate and not inflation on the whole in this case.

Hope that helps.

5 0
3 years ago
n the cash flow information for the Ping Kings project, Ping spent $300,000 for research and development of the golf clubs. Ping
Gre4nikov [31]

Answer: C. $0

Explanation:

When including initial costs in a project's cash-flow, the relevant costs are those that henceforth will be spent on the project. Sunk costs are not to be included because they have already been incurred and cannot be recovered.

Research and Development costs have already been incurred and so are sunk costs. Hence they are not to be included in the initial cash-flow for the project.

6 0
3 years ago
The local convenience store advertises 50% off frozen slushies. As a result of the sale, the store sells 80% more slushies, but
Reil [10]

Answer:

0.4

Explanation:

Given that,

Convenience store advertises 50% off frozen slushies: This means that the price of slushies decreases by 50%.

20% Fewer sales of fountain drinks: This means that the quantity demanded of fountain drink decreases by 20%.

Percentage change in the price of slushies = 50%

Percentage change in the quantity demanded of fountain drink = 20%

Cross price elasticity measures the responsiveness of quantity demanded for one good to any change in the price level of the other good.

Therefore, the cross elasticity between slushies and fountain drinks is as follows:

= Percentage change in the quantity demanded of fountain drink ÷ Percentage change in the price of slushies

= 20 ÷ 50

= 0.4

Therefore, the positive cross price elasticity indicates that these are the substitute goods.

3 0
3 years ago
An airline manufacturer incurred the following costs last month (in thousands of dollars):
enot [183]

Answer:

Instructions are listed below

Explanation:

- Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product.

- Direct labor is production or services labor that is assigned to a specific product, cost center, or work order.  

- Manufacturing overhead refers to indirect factory-related costs that are incurred when a product is manufactured.

- Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs. SG&A includes costs of the corporate office, selling, marketing, and the overall administration of company business.

In this exercise:

Direct Material:

Airplane seats . . . . . . . . . . . . . . . . . . . . . . . . . $220

Jet engines . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,700

Total= $1920

Direct labor:

Assembly workers' wages . . . . . . . . . . . . . . . . . . . $600

Machine operators' health insurance . . . . . . . . . . $40

Total= $640

Indirect labor:

Production supervisors' salaries . . . . . . . . . . . . . . $170

Factory janitors' wages . . . . . . . . . . . . . . . . . . . . . $60

Total= $230

MOH:

Machine lubricants . . . . . . . . . . . . . . . . . . . . . $35

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160

Depreciation on forklifts . . . . . . . . . . . . . . . . . . . . $110

Total= $305

Period cost:

Property tax on corporate marketing office . . . . . $25

Cost of warranty repairs . . . . . . . . . . . . . . . . . . . . $230

Depreciation on administrative offices . . . . . . . . . $60

Cost of designing new plant layout . . . . . . . . . . . . $165

Total= $480

3 0
3 years ago
The inventory of Cullumber Company was destroyed by fire on March 1. From an examination of the accounting records, the followin
maria [59]

Answer:

a. Merchandise lost by fire value  = $20,760

b. Merchandise lost by fire value  = $25,770

Explanation:

Net sales = $51,000 - $1,100

= $49,900

Net purchase cost = $31,000 + 1,200 - $1,500

= $30,700

a. Gross profit = $49,900 × 40%

= $19,960

Cost of goods sold = $49,900 - $19,960

= $29,940

Cost of goods sold = beginning inventory + Purchases - ending inventory

= $29,940 = $20,000 + $30,700 -  ending inventory

Ending inventory = $20,760

Merchandise lost by fire value  = $20,760

b. Gross profit = $49,900 × 30%

= $14,970

Cost of goods sold = $49,900 - $14,970

= $34,930

Cost of goods sold = beginning inventory + Purchases - ending inventory

= $34,930 = $30,000 + $30,700 - ending inventory

ending inventory = $25,770

Merchandise lost by fire value  = $25,770

5 0
3 years ago
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