Sport Revenue

1-2 Wiki: Group Practice Problems #1

This week, your instructor will divide the class into teams. You will work in these teams to complete Practice Problems throughout the course. For additional details on working effectively in a virtual collaborative team environment, please refer to the Group Work document in the Assignment Guidelines and Rubrics section of the course. With your team, complete the following assignment: For the given proposed payments (below), calculate the present value and determine which payment is the most favorable for the athlete. Were you surprised by the result? What might be some benefits of deferred money for both the player and the team? What are some drawbacks of deferred money for both the player and team? Do you agree with the NBA/NBPA decision to institute mandatory annuity contributions for retirement? How would you feel if your employer mandated this type of contribution? Submit responses as part of the Group Wiki and discuss how you arrived at your answer.

Click the above link to navigate to your group wiki and complete this modules entry. For additional details, please refer to the Group Wiki Rubric document in the Assignment Guidelines and Rubrics section of the course. Note: You will also download and fill out the group evaluation form (below). The feedback provided by your team members will affect your final grade under the Teamwork critical element in the rubric.

Time Value of Money Example

Assume that you are an agent representing a player in free agency. After negotiating, five different teams have proposed the offers listed below. Calculate the present value of each offer to help your client determine which proposal offers the most overall cash over the life of the deal. Each contract is for 5 years and there is an 8% discount rate.

Offer 1

Signing bonus of $3M

Starting salary of $3M in year 1, with annual 20% raises

Offer 2

No signing bonus

Salaries as follows:

Year 1: $2M

Year 2: $3M

Year 3: $6M

Year 4: $7M

Year 5: $9M

Offer 3

Signing bonus of $3M

Annual salary of $5M

Offer 4

Signing bonus of $12M

Annual salary of $2.5M

Offer 5

Signing bonus of $2M

Annual salary of $3M

Deferred payment of $25M, paid 10 years after contract ends (15 years from now