Question
FIFA rules regarding player contracts are very interesting. If a player wishes to break his contract, the purchasing club must pay the players club four
FIFA rules regarding player contracts are very interesting. If a player wishes to break his contract, the purchasing club must pay the players club four times the players annual salary multiplied by the number of years left on the contract. The player must pay 10% of this amount personally and the agent must also pay 10% of the amount from his own pocket. Consider a footballer who earns 120,000 a week and has 4 years of his contract left. a) Calculate how much the player would personally have to pay if he left his club with 4 years remaining, 3 years remaining, 2 years remaining, and 1 year remaining. b) If the appropriate annualised discount rate is 8%, what is the present value of him breaking his contract with 4, 3, 2, 1 and 0 years remaining? c) Assuming you are the players agent and can personally earn 5m today from getting him to sign a pre-contract agreement to join Real Madrid in the future. Calculate the net present value to you if the player left with 4 years remaining, 3 years remaining, 2 years remaining, and 1 year remaining.
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