2 3 Calculation Questions (Answer these questions on excel. Each problem should be answered on a different sheet) 1. What do the timelines look like for each of Scialomie's contract offers? That is, what is the nominal value of each payment and when is each payment happening? Table 2 Contract Offers from the Orioles (All Dollar Figures are in Millions) Signing Total Offer bonus Playing salary Deferred compensation nominal (paid at to) per year (t:-) value #1 $2.75 S2.75 None $16.5 #2 None $1.5 53 annually, for 5 years, starting in year 8 $22.5 (ts-ti) #3 None $1.5 A 10-year growing annuity that starts with S23.4 SI in year 9 (ts-t18) and grows at 10% per year None $1.1 A lump sum (single payment) of S25 at to S30.5 Average salary reported in media $3.3 $4.5 $4.7 $6.1 Structuring Scialomie's Deal A typical contract negotiation will involve numerous factors, both financial and nonpecuniary. Regine and the Orioles have already agreed upon many of the nonpecuniary details about Scialomie's contract, leaving just financial aspects to finalize. Some players' egos dictate that they get the largest nominal value contract, since that is what will make headlines. Fortunately, Scialomie has been smart enough to listen to Regine and knows that the nominal value is irrelevant- he wants the highest TVM deal. Scialomie has also listened to Regine about not squandering his salary. Some agents counsel their clients toward seeking deferred compensation, knowing that they need the future financial security; Regine feels no such need. Still, Scialomie would not mind the additional supplemental income in the future. Furthermore, Scialomie wants to play with better players and knows that taking some of his money later will allow the Orioles to shift capital to others on the free agent market. Scialomie is a better than average player overall, and hits well for a catcher, but the risk of reinjuring a surgically repaired throwing arm reduces his market value. The average annual salary for a catcher is around $2.24m, though Regine argues that Scialomie's strong hitting should allow him to make closer to the league average (across all positions) of $4.5m (Sportrac, 2017). With that range in mind, the Orioles prepared four possible contract offers that would work with their strategic plans and other salary commitments (see Table 2). All offers are for five years of playing with the team. 2 3 Calculation Questions (Answer these questions on excel. Each problem should be answered on a different sheet) 1. What do the timelines look like for each of Scialomie's contract offers? That is, what is the nominal value of each payment and when is each payment happening? Table 2 Contract Offers from the Orioles (All Dollar Figures are in Millions) Signing Total Offer bonus Playing salary Deferred compensation nominal (paid at to) per year (t:-) value #1 $2.75 S2.75 None $16.5 #2 None $1.5 53 annually, for 5 years, starting in year 8 $22.5 (ts-ti) #3 None $1.5 A 10-year growing annuity that starts with S23.4 SI in year 9 (ts-t18) and grows at 10% per year None $1.1 A lump sum (single payment) of S25 at to S30.5 Average salary reported in media $3.3 $4.5 $4.7 $6.1 Structuring Scialomie's Deal A typical contract negotiation will involve numerous factors, both financial and nonpecuniary. Regine and the Orioles have already agreed upon many of the nonpecuniary details about Scialomie's contract, leaving just financial aspects to finalize. Some players' egos dictate that they get the largest nominal value contract, since that is what will make headlines. Fortunately, Scialomie has been smart enough to listen to Regine and knows that the nominal value is irrelevant- he wants the highest TVM deal. Scialomie has also listened to Regine about not squandering his salary. Some agents counsel their clients toward seeking deferred compensation, knowing that they need the future financial security; Regine feels no such need. Still, Scialomie would not mind the additional supplemental income in the future. Furthermore, Scialomie wants to play with better players and knows that taking some of his money later will allow the Orioles to shift capital to others on the free agent market. Scialomie is a better than average player overall, and hits well for a catcher, but the risk of reinjuring a surgically repaired throwing arm reduces his market value. The average annual salary for a catcher is around $2.24m, though Regine argues that Scialomie's strong hitting should allow him to make closer to the league average (across all positions) of $4.5m (Sportrac, 2017). With that range in mind, the Orioles prepared four possible contract offers that would work with their strategic plans and other salary commitments (see Table 2). All offers are for five years of playing with the team