Present Values. A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5-year contract providing $4 million now and $2 million a year for 5 years. Who is better paid? The interest rate is 10 percent.

Unless I'm missing something, I don't see it as questionable.

Both are 5 years and both are 10%, so you can throw those out of the equation, leaving you with either 15mil or 14mil over 72 months.

I'll take the 15mil.

Rick, you are not taking the time value of money into account. If I gave you $10 tomorrow, would that be a better deal or would you rather have $12 in 7 years?

Famous QB
Annuity
3 million/yr for 5 years @ 10%
NPV = $11,372,360.31

Not-so famous QB
Annuity
2 million/yr for 5 years @ 10% (plus 4million today)
NPV = $7,581,573.54 + $4,000,000
NPV = $11,581,573.54

Therefore, the not-so famous QB 14 million dollar deal is a better one.

Aah. I misfigured - and used $4mil for the first year for the 2nd guy, when I should have used $6mil

[insert smilie knuckling self on the head]