Question
In 2019, Lamar, a top college quarterback, signed a $40.4 million football contract structured as follows: for the years 2019 through 2024 inclusive, it paid
In 2019, Lamar, a top college quarterback, signed a $40.4 million football contract structured as follows: for the years 2019 through 2024 inclusive, it paid him equal annual upfront payments which totaled $3.9 million. He also received an upfront signing bonus of $500K. The balance of the contract was paid out equally for 30 years (end of year) following the initial series of annual payments.
On the other hand, Melvin, a star running back, signed a deal which paid him $18 million over four years as follows: 50% upfront with the balance of the contract paid out equally at the end of each year for the duration of the contract.
Around the same time J.J., a bone crushing lineman, received a 4-year, $24 million contract extension which included an upfront signing bonus of $6 million; $1.5 million/year in salary for the duration of the contract and a $300K payment at the beginning of each year for the next 40 years.
Assume annual interest compounding, a discount rate of 10% and no taxation impact.
Who got offered the better deal and why?
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