Kwame, a star basketball player is looking to join a new NBA…

Questions

Kwаme, а stаr basketball player is lооking tо join a new NBA team.  The Bulls are offering him  $24 million for one year.  The Heat is offering him $10 million this year and $8.0 million in each of  the next two years*.  The market interest rate is 5 percent.   a) What is the present value of the offer from the Heat in millions (rounded to the nearest one hundred thousand dollars? Show your work (5) b) If you were Kwame,  which offer would you take?** (5) c)  Suppose the market interest was now 9 %,  would that change Kwame's  decision? Why or why not? (5) *this is still for one year of play ** you can assume that Kwame is indifferent between the two teams.  The only thing that matters is his salary.

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