Quote:
Originally Posted by Enoch Root
There is no deferral there, just an average of all the nominal payments. Why are you trying to create something that doesn't exist?
Scenario 1: $1M salary and $10M bonus
Scenario 2: $11M salary and $0 bonus
Different timing of cash flows, same $11M cap hit. No deferral, no NPV of cash flows. Simple average of nominal payments.
The only contract that discounts any cash flows is the one that goes beyond 8 years.
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No the only contracts that have discounts are the ones where the years where the Salary/Bonus is earned is different from when the salary is paid.
The bonus is earned and paid the same day. The Salary is earned and paid the same year. In all cases the cap hit is assessed when the Salary is earned.