MPSM 700-Assume that two athletes sign 10-year contracts

Assume that two athletes sign 10-year contracts that pay out a total of $100 million over the life of the contracts. One contract will pay the $100 million in equal installments over the 10 years. The other contract will pay the $100 million in installments, but the installments increase 5% per year. Which athlete received the better deal? You must show your work and explain your position in detail.

A professional sport athlete, let’s call her Sue, has a nonguaranteed (meaning that she receives no salary if she is cut from the team or injured) contract that pays her $5 million per year for the next five years. Sue has been severely injured in an automobile accident and will no longer be able to work, let alone play for her team. When Sue sues the driver of the other vehicle in court, the jury awards her $25 million to cover the loss of earnings over the next five seasons. Given what we have learned in this chapter, was the jury correct?