A Sports Team in an Effort to Solve the Salary

question 22

Multiple Choice

A sports team in an effort to solve the salary cap problem has offered a player a contract of $1 million dollars a year for the next season with the payments growing at 7% per year for the next 25 years. The player believes the discount rate for such payments is 13%. What is the value today of taking this contract?

• A) $12,405,955.40
• B) $16,666,666.67
• C) $884,956.09
• D) $5,824,965.76

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Definitions:

Sensory Adaptation

A process in which the same chemical can stimulate receptors only for a limited amount of time until the receptors eventually no longer respond to the chemical.

Nerve Damage

This occurs when nerves are compressed, stretched, or severed, leading to pain, numbness, or weakness in the affected area, often as a result of injury or disease.

Savory

Relating to food that is salty or spicy rather than sweet, with a pleasant, appealing taste.