Quote:
Originally Posted by GGG
That’s what I did. The two scenarios both have the same NPV to the player provided a 7.5% discount rate is fair.
Essentially the question whether this is better or worse for the player is purely based on wether the risk adjusted return on the 7.5% blue jackets unsecured debt is a reasonable rate of return.
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In scenario 1, the player got $80 and the cap hit was $10M
In scenario 2, the player got $94M and the cap hit was $10M
More money, same cap.
How many times do I have to say this isn't about the discount rate or the time value of money. It is about the fact that an 8 year deal gets calculated at notional value and and 8 year + 1 day gets discounted. Apples and oranges, and it affects the cap.