Monday, July 29, 2013
Time Value of Money
What's the difference between these two salary payouts?
| 2014 | $ 30 | $ 10 |
| 2015 | $ 27 | $ 13 |
| 2016 | $ 24 | $ 16 |
| 2017 | $ 21 | $ 19 |
| 2018 | $ 18 | $ 22 |
| 2019 | $ 15 | $ 25 |
| 2020 | $ 12 | $ 28 |
| 2021 | $ 9 | $ 31 |
| TOT | $ 156 | $ 164 |
Now, does one salary structure make one more trade-able than the other? No! Because you simply trade enough dollars to make the two equals. If you sign a player to start at 30MM$ and go down by 3MM$ a year, you are probably roughly following a pay-for-play, so that at any point, you are neither backloading nor frontloading the deal, beyond the expected performance. But, if you start the guy at 10MM$, you are heavily backloading the deal. You are deferring salary. How much? Well, that first year, you deferred 20MM$. And the second year, you deferred 14MM$. If you trade this player after two years (and if his performance followed the normal decline), you'd have to throw in the present-value equivalent of those 34MM$ that you deferred.
The only advantage that one has over the other is with respect to luxury tax or other shelter-type plans. From the perspective of the fan or the player, it's totally irrelevant. That Bobby Bonilla is still getting paid doesn't mean anything.
Recent comments
Older comments
Page 1 of 150 pages 1 2 3 > Last ›Complete Archive – By Category
Complete Archive – By Date
FORUM TOPICS
Jul 12 15:22 MarcelsApr 16 14:31 Pitch Count Estimators
Mar 12 16:30 Appendix to THE BOOK - THE GORY DETAILS
Jan 29 09:41 NFL Overtime Idea
Jan 22 14:48 Weighting Years for NFL Player Projections
Jan 21 09:18 positional runs in pythagenpat
Oct 20 15:57 DRS: FG vs. BB-Ref
Apr 12 09:43 What if baseball was like survivor? You are eliminated ...
Nov 24 09:57 Win Attribution to offense, pitching, and fielding at the game level (prototype method)
Jul 13 10:20 How to watch great past games without spoilers