Fillmore is committed to accepting the contract that provides him with the highest net present value (NPV). At what discount rate would he be indifferent between the two contracts?

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7. Martin Fillmore is a big football star who has been offered contracts by two different teams.
Thepayments (in millions of dollars) he receives under the two contracts are listed below:
a. 11.45%
b. 14.35%
Year
0
c. 15.45%
d. 17.98%
e. 21.23%
01234
1
Team A
Cash Flow
$7.0
4.0
4.0
4.0
4.0
Team B
Cash Flow
Fillmore is committed to accepting the contract that provides him with the highest net
present value (NPV). At what discount rate would he be indifferent between the two
contracts?
$2.5
4.0
4.0
8.0
8.0
Transcribed Image Text:7. Martin Fillmore is a big football star who has been offered contracts by two different teams. Thepayments (in millions of dollars) he receives under the two contracts are listed below: a. 11.45% b. 14.35% Year 0 c. 15.45% d. 17.98% e. 21.23% 01234 1 Team A Cash Flow $7.0 4.0 4.0 4.0 4.0 Team B Cash Flow Fillmore is committed to accepting the contract that provides him with the highest net present value (NPV). At what discount rate would he be indifferent between the two contracts? $2.5 4.0 4.0 8.0 8.0
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