A star basketball player signs a contract that newspaper reports say is worth $10 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A. more than $10 million because the present value of $5 million received one or more years from now is more than $5 million.
B. less than $10 million since the present value of $5 million received one or more years from now is less than $5 million.
C. $10 million as reported in the papers.
D. either more or less than $10 million, depending on the value of the discount rate.
Answer: D
You might also like to view...
A firm that is seeking to minimize costs to produce a certain output
A. has a fixed budget B. has a large budget C. wants to use the smallest possible budget possible D. wants to use the same budget as that used last year
Refer to Figure 18.2. A shift from AS2 to AS1 may result from
A. An increase in the reserve requirement. B. A decrease in the money supply. C. A decrease in government spending. D. An increase in the minimum wage.
Let the demand function for a product be Q = 50 ? 5P. The inverse demand function of this demand function is:
A. Q = 25 + P B. P = 10 + 0.2Q C. P = 50 ? 0.2Q D. P = 10 ? 0.2Q
In a progressive income tax system
A. the average tax rate exceeds the marginal tax rate. B. the marginal tax rate exceeds the average tax rate. C. the tax rate depends solely on how long an individual has been in the labor force. D. high income earners pay a lower percentage of their income in taxes than do low income earners.