When entering intermediate values as answer choices, be sure to round them to the nearest dollar, however when using those same values to calculate another answer, do not round.ġ. Round all dollar amounts to the nearest whole dollar and carry out all interest rate factors to four decimal places. Therefore, it may be necessary to compute the appropriate interest rate that should be used in a discounting calculation. For example, annual interest rates should be used to discount annual cash flows, and monthly interest rates are used to discount monthly cash flows. ![]() Remember that the timing of a cash flow affects the interest rate that is used to discount the cash flow. ![]() The endorsement proceeds are paid in accordance with the terms of the deal. Their value should be based on the salary in effect at the time the bonuses were earned. Note: To clarify possible sources of confusion and simplify your calculations:Īssume that all bonuses are earned in each of the years for which they are available and are paid at the end of the corresponding year(s), unless specifically stated differently. After an extended conversation about what he’ll do with his newfound wealth, you and Flynn have agreed that any funds received could be invested to earn 6.00%, compounded monthly.Ĭomplete the following worksheet by inserting the appropriate values to evaluate the contract and answer the related questions. After rereading the email twice and calling his family, Flynn called you to review the terms of the contract and verify Noah’s calculations. The email describes the general terms and conditions of Flynn’s revised contract.įlynn is so excited! According to Noah, the contract is worth $2,382,400-assuming receipt of all possible bonuses. ![]() Moreover, Flynn’s contract is being revised to reflect his new status. Two weeks ago, on his three-year anniversary with the team, Flynn received the following email from his agent, Noah Never-Enough, indicating that he is being called up to the Springfield Dusties, the Baldies’s corresponding Major League Baseball (MLB) team. Using his 99 mph fastball, an impeccable curveball and slider, and a reliable changeup pitch, he achieved a 18-2 win–loss record, an earned run average (ERA) of 2.23, and 166 strikeouts in 147.2 innings pitched. Last season, he was a starting pitcher for a double-A (AA)-level baseball team, the Ketchum Baldies last year, he was the first runner-up for the Minor League Player of the Year award. Flynn Fireballer has been playing baseball since he was five years old and has always dreamed of playing in the big leagues.
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