Quote:
Originally Posted by Enoch Root
And here we go.
Contracts are NOT present valued. All contracts are notional, with the total dollar payout being divided by the number of years, to determine the AAV.
This contract is for $18M, and the player is under contract for 3 years, but the AAV is $4.57M
We all understand the present value of money, that is not the issues here. The issue is that contracts are notional, using the AVERAGE payout to determine the AAV, precisely for the purpose of not allowing teams to circumvent the cap by frontloading or backloading a contract.
|
The cap hit is determined based on the differed payments. Since he is getting $3m per season, why is the cap hit $4.67M? It’s based on the present day value of the deferred payments. We can assume that the present day value of the $9M deferred payments is $5M, the amount added to the actual $9M paid over the 3 year contract.