Michael received a professional baseball contract paying $7,000,000 for 5 years, Bert received a two-year contract for $16,000,000 per year. For purposes of calculations, treat these contracts as ordinary annuities
What are the present values of each contract if we assume a discount rate of 6%? It is not clear that the higher present value is the preferred contract in this situation. What other factors might you consider when determining which contract has greater value?
Bert = $29,334,283, Michael = $29,486,547. What happens to Bert in years 3,4, and 5? If he makes no more money than this is a fair comparison, but if he continues to play professional ball at a high level, then he can expect a fair amount of money in the subsequent three years. Later we will see how financial managers make comparisons such as this.
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Competitive distribution structures cannot differ in the same market
Indicate whether the statement is true or false
All of the following are common industry risks faced by companies except:
a. litigation b. technology c. regulation d. competition
An agreement between two parties to pay a lesser amount to settle an unliquidated debt is
a. enforceable, as there is consideration. b. unenforceable, as there is no consideration. c. enforceable in only some states. d. unenforceable as a violation of public policy.
An employer provides all employees with term life insurance equal to their annual income. Using the income method with a factor of 5, how much additional life insurance will an employee earning $75,000 per year need?
A) $375,000 B) $300,000 C) $75,000 D) $50,000