A rookie quarterback is negotiating his first NFLcontract. His opportunity cost is 10 percent. Hehas been offered three possible
4-year contracts. Payments are guaranteed, and they would be made at the end ofeach year. Terms of each contract are listedbelow: As his advisor, which would you recommendthat he accept?
1 2 3 4
Contract1 $3,000,000 $3,000,000 $3,000,000 $3,000,000
Contract2 $2,000,000 $3,000,000 $4,000,000 $5,000,000
Contract3 $7,000,000 $1,000,000 $1,000,000 $1,000,000
A. Contract 2 gives the quarterback the highest present value; therefore, he should accept Contract 2. B. Contract 3 gives the quarterback the highest present value; therefore, he should accept Contract 3. C. Contract 1 gives the quarterback the highest future value; therefore, he should accept Contract 1. D. Contract 3 gives the quarterback the highest future value; therefore, he should accept Contract 3. E. Contract 1 gives the quarterback the highest present value; therefore, he should accept Contract 1.
