Quote:
Originally Posted by GGG
So scenario 1
Player gets an 8yr/ 80 million dollar cap hit 10 million cap hit
Scenario 2
Player gets an 8 yr / 94.3 million contract with a 10 million bonus in each of the first two years which is deferred and paid out in year nine at 7.5% interest. 17.8 million for the first bonus and 16.5 million for the second bonus.
Both have cap hits of 10 million per season. Both have the same NPV for the player using a 7.5% discount rate.
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In scenario 2 as you presented it, the deferred payments earn interest and as such are counted in full against the cap. Scenario 2 as presented would carry an AAV of $11.788/year.
If they don't earn interest, then a portion of the differed amount as calculated by current fair market value which is 1-year LIBOR rate (now SOFR rate) plus 1.25% counts against the cap.
If Draisatl signed an 8-year contract for $115 million and deferred $33 million they could maybe save $1 million per year AAV
https://puckpedia.com/deferred