ACC305Communication Case 6

# ACC305Communication Case 6 - Dear Mr. Marks, RE: Agent for...

This preview shows page 1. Sign up to view the full content.

Communication Case 6-3 on page 334 Harvey Alexander, an all-league professional football player, has just declared free agency. Two teams, the San Francisco 49ers and the Dallas Cowboys, have made Harvey the following offers to obtain his services: 49ers: \$1 million signing bonus payable immediately and an annual salary of \$1.5 million for the five-year term of the contract. Cowboys: \$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. Required: You have been hired as a consultant to Harvey’s agent, Phil Marks, to evaluate the two contracts. Write a short letter to Phil with your recommendation including the method you used to reach your conclusion. Assume that Harvey has no preference between the two teams and that the decision will be based entirely on monetary considerations. Also assume that Harvey can invest his money and earn an 8% annual return.
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Dear Mr. Marks, RE: Agent for Harvey Alexander I have reviewed both contracts for Mr. Alexander and have to come the following conclusion based on the information given. The future value of the first offer is 1*1.08^5 + 1.5*1.08^5-1/.08 = 1.47+8.8 = \$10.27 million, while the future value of the second option is 2.5*1.08^5 + 1*1.08^5-1/.08 = 3.67+5.87 = \$9.54 million. Keeping in view the difference in future value of both offers, the offer of 49ers seems better, therefore it should be accepted. If Mr. Alexander were to choose the 49ers he would make after investing his money \$10.27 million. If Mr. Alexander were to choose the cowboys he would make after investing his money \$9.54 million. Although the Cowboys offer seems very generous because of the larger signing bonus since M r. Alexander is looking into investing his money he will make more money if he goes with the 49ers contract making over half a million more with their offer. Thank you, Kenroy Fletcher...
View Full Document

## This note was uploaded on 11/15/2011 for the course SCIENCE 207 taught by Professor Reale during the Fall '11 term at Ashford University.

Ask a homework question - tutors are online