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1) European soccer team is thinking buying a star player in transfer market. To buy player, team would have to pay transfer fee to player’s present team of= $9M. Team is also contractually obligated to pay player a salary of= $2M per year for next six years. Though, player is expected to raise team’s performance by four wins per year. Historical data illustrates each extra win is worth approximately= $1.5M in revenues from ticket sales. Suppose transfer fee can be depreciated in the straight line manner over life of contract, but that the yearly salary can’t be depreciated. Team’s tax rate is= 30% and applicable discount rate is= 4%. Should the team purchase the player?

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