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Calculate the present value of offer to help

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Assume that you are an agent representing a player in free agency. After negotiating, five different teams have proposed the offers listed below. Calculate the present value of each offer to help your client determine which proposal offers the most overall cash over the life of the deal. Each contract is for 5 years and there is an 8% discount rate.

Offer 1

Signing bonus of $3M

Starting salary of $3M in year 1, with annual 20% raises

Offer 2

No signing bonus

Salaries as follows:

Year 1: $2M
Year 2: $3M
Year 3: $6M
Year 4: $7M
Year 5: $9M

Offer 3

Signing bonus of $3M
Annual salary of $5M

Offer 4

Signing bonus of $12M
Annual salary of $2.5M

Offer 5

Signing bonus of $2M
Annual salary of $3M
Deferred payment of $25M, paid 10 years after contract ends (15 years from now)

Reference no: EM132682144

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