3. A Villanova basketball player just got an offer to join the Milwaukee Bucks. The...
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3. A Villanova basketball player just got an offer to join the Milwaukee Bucks. The Bucks are offering him a $10,000,000 contract to play for five years, which can be paid in one of two ways:
Payout 1: $2,000,000 per year for five years paid at the end of each year.
Payout 2: $2,000,000 signing bonus (i.e., at the beginning of year 1) and $1,600,000 per year for each of the five years paid at the end of each year.
Assuming the basketball player can earn 10% on his money, which payout should he take?
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