Solve the following problem...
You have received two endorsement offers –one for $25,000 from Reebok and one for $ 27,000 from Easton—both to be paid in 4 years. The risk of default with the Easton is higher, so a discount rate of 12% as opposed to 9% is applied. Which is the better investment opportunity?
Sport agent A, negotiated a long-term sponsorship deal that called for yearly payments to an athlete of $100,000 for five years with a discount rate of 10%. What is the present value of the athlete’s deal? Sport agent B, negotiated a long-term sponsorship deal that called for yearly payments to an athlete of $120,000 for five years with a discount rate of 12%. What is the present value of the athlete’s deal?