Shohei Ohtani is considered to currently be the greatest player in Major League Baseball ( ( MLB
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Shohei Ohtani is considered to currently be the greatest player in Major League Baseball (MLB). Between his ability to bring in marketing revenue and his stellar play on the field (he can pitch and hit), the belief is he will break MLB salary records. He has become a free agent and can sign with any team he wants. The largest contract in major league history up to this point is Mike Trout, who signed a 12 year, $426.5 million contract, which pays out $16MM the first year and the remaining balance is paid out evenly over the next 11 years.
Ohtani decides to sign with the Dodgers for $700MM over 10 years. Many believe this is an insane price given that it is almost double Trouts deal. High end contracts increase by 10−20%, but not by 75%. However, the payment terms of Ohtanis contract is friendly to the team: he will be paid $2MM/yr for the 10 years and then the remaining balance is deferred; in the 10 years following the initial 10, he will be paid the remaining balance at a rate of $68MM/yr.
a. In terms of present value, how much is each contract worth?
b. Is Ohtanis contract ridiculous? Explain
Related Book For
Microeconomics Principles Applications And Tools
ISBN: 9780134078878
9th Edition
Authors: Arthur O'Sullivan, Steven Sheffrin, Stephen Perez
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