An NHL hockey player is offered the choice of two 4-year salary contracts, contract X...
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An NHL hockey player is offered the choice of two 4-year salary contracts, contract X for $3.27 million and contract Y for $3.12 million: (Click the icon to view the salary contracts.) Which contract has the higher PV at 16% compounded annually? Show computations to support your answer. Begin by calculating the present value of the each annual salary payment, as well as the contract in total, for Contract X. Next, calculate the present value of each annual salary payment, as well as the contract in total, for Contract Y, and determine which contract has the higher PV. Present value Payment made at the: Contract X End of year 1 End of year 2 End of year 3 End of year 4 Total Enter any number in the edit fields and then click Check Answer. X i Reference Contract X Contract Y End of year 1 $ 530,000 830,000 End of year 2 End of year 3 230,000 $ 730,000 1,080,000 1,230,000 830,000 930,000 End of year 4 $ 3,270,000 $ 3,120,000 Total Print Done
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