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Tim Tebow, the star quarterback of a national championship college football team, is approached about...

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Finance

Tim Tebow, the star quarterback of a national championship college football team, is approached about giving up his last two years of college life and making himself available for the NFL draft. Some expert scouts estimate that Tim could receive a signing bonus of $4.5 million today, along with a three-year contract for $4 million per year (payable at the end of the year). They further estimate that he could negotiate a contract for $9 million per year for the nine remaining years of his career. The scouts believe, however, that Tim will be a much higher draft pick if he improves by playing in the college. If he stays in college, he is expected to receive a $9.5 million signing bonus in two years, along with a five-year contract for $8 million per year. After that, the scouts expect Tim to obtain another five-year contract for $11 million per year to take him into retirement. Assume Tim can earn a 6.5 percent annual return over this time. Should Tim stay in college or go into the NFL draft today?

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