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Offer Deferred compensation Signing bonus (paid at to) $2.75 None Total nominal value $16.5 $22.5 Playing salary per year (tts) S2.75 $1.5 #1 Average salary

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Offer Deferred compensation Signing bonus (paid at to) $2.75 None Total nominal value $16.5 $22.5 Playing salary per year (tts) S2.75 $1.5 #1 Average salary reported in media $3.3 $4.5 #2 #3 None $1.5 None $3 annually, for 5 years, starting in year 8 (ts-t12) A 10-year growing annuity that starts with S1 in year 9 (to-t18) and grows at 10% per year A lump sum (single payment) of S25 at 120 $23.4 $4.7 #14 None $1.1 $30.5 $6.1 4. Regine believes the Orioles might have some hesitation about locking in Scialomie for five years, so she thinks about proposing a four-year contract instead of the five-year deal. In such an offer, she knows that there needs to be enough deferred compensation so that Scialomie's salary over the four years of playing does not overly burden team payroll. Design two contract counteroffers for Regine to present to the Orioles. They must be structured differently from each other-to give the Orioles some options--and both must meet the following characteristics: a. The contract has a total PV of between $15.5m and $16.0m, assuming a 5.5% discount rate b. Scialomie must earn at least $0.6m (nominal value) in each of the playing years c. There is deferred compensation build into the contract. 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

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