Quote:
Originally Posted by Enoch Root
You keep missing the point (and actually arguing against yourself)
The issue here is not the time value of the contract. It is the fact that, because the contract is deferred beyond the 8 year max, it is allowed to NPV the future payments. NO CONTRACT OF 8 YEARS OR LESS CAN DO THIS.
As a result, the cap hit is less. Adding the one day beyond 8 years allows for the cap hit to be reduced.
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In all contracts of 8 years or less, payment is made at the time that service is delivered. You get paid in year 1 for your play in year 1, and in year 8 for your play in year 8. The present value of each dollar paid is $1 at the time when the corresponding service is performed.
Jarvis's contract pays him in year 9 for his work in years 1, 2, and 7. Specific amounts are being deferred to a specific date, and the present value of those deferred dollars is less than $1 each.