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Wade Ford, an all-league professional football player, has just declared free agency. Two teams, the...

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Accounting

Wade Ford, an all-league professional football player, has just declared free agency. Two teams, the New York Giants and the Los Angeles Rams, have made Ford the following offers to obtain his services:

Giants:

$1 million signing bonus payable immediately and an annual salary of $1.5 million for the five-year term of the contract.

Rams:

$2.5 million signing bonus payable immediately and an annual salary of $1 million for the five-year term of the contract.

With both contracts, the annual salary will be paid in one lump sum at the end of the football season.

You have been hired as a consultant to Fords agent, Payton Grahn, to evaluate the two contracts. including the calculation(s) and method(s). Assume that Ford has no preference between the two teams and that the decision will be based entirely on monetary considerations. Also, assume that Ford can invest his money and earn an 8% annual return.


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