As the Manager of a Professional Football Team, You Just

Multiple Choice

As the manager of a professional football team, you just offered the kicker a two-year contract that pays $2 million at the end of each of the next two years. The kicker refuses the contract, stating he wants $3 million at the end of this year. If you offer $3 million at the end of this year, about how much will you have to offer at the end of next year to keep the present value of the contract the same as your original offer? Assume a 10% annual interest rate.

A) $1 million
B) $900,000
C) $808,080
D) $743,800