In: Finance

You are the number one free agent in the National Hackey-Sack League. You get offered three different 5-year contracts, denoted A, B, and C below. Assuming you can earn 12% per year on your investments, which contract should you take?

Contract A: You are offered $100,000 today, $200,000 in one year, and a final payment of $200,000 in five years.

Contract B: You will get $200,000 today, $200,000 in three years, and a final payment of $100,000 in five years.

Contract C: You will get $100,000 each of the next five years.

**Solution :**

**The present value of the cash inflows from Contract A =
$ 392,056.80**

**The present value of the cash inflows from Contract B =
$ 399,098.74**

**The present value of the cash inflows from Contract C =
$ 360,477.62**

**Contract B has the highest present value of the cash
inflows at $ 399,098.74 . Thus Contract B should B taken
up.**

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

You are the number one free agent in the National Hackey-Sack
League. You get offered three different 5-year contracts, denoted
A, B, and C below. Assuming you can earn 12% per year on your
investments, which contract should you take? Contract A: You are
offered $100,000 today, $200,000 in one year, and a final payment
of $200,000 in five years. Contract B: You will get $200,000 today,
$200,000 in three years, and a final payment of $100,000 in five
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