In our previous question, we looked at the numbers for Big Dog’s basketball contract. Now let’s take a look at the terms for Shaquille “Shaq” O’Neal, the number one pick in 1992 who was drafted by the Orlando Magic. Shaquille signed a seven-year contract with estimated total payments of about $40 million. Although the precise terms were not disclosed, it was reported that Shaq would receive a salary of $3 million the first year, with raises of $900,000 each year thereafter. If the cash flows are discounted at the same 10 percent discount rate we used for Robinson, does the “Shaq Attack” result in the same kind of numbers? Did Robinson achieve his goal of being paid more than any other rookie in NBA history, including Shaq? Are the different contract lengths a factor?

Data from Problem 43

In the 1994 NBA draft, no one was surprised when the Milwaukee Bucks took Glenn “Big Dog” Robinson with the first pick, but Robinson wanted big bucks from the Bucks: a 13-year deal worth a total of $100 million. He had to settle for about $68 million over 10 years. His contract called for $2.9 million the first year, with annual raises of $870,000. So, how big a bite did Big Dog really take? Assume a 10 percent discount rate.