Doug Melvin complains about Yanks CC offer

[mweb]

The present value of the Yankees' offer is not $140M either.

Does it have a lot of deferred money like the Santana deal does?

[davearm]

Does it have a lot of deferred money like the Santana deal does?

Well it's obviously not $140M upfront, so yes, most of the money is deferred.

The deferment mechanisms may not be identical of course, but the point remains that the Yanks' offer is worth less than $140M in present value terms. How much less, none of us can say.

[Mad Mark]

The Yankees know that CC would prefer to be on the west coast and perhaps prefer the NL as well and because of that, the Yanks know that they have to blow him away to get him to come back to the AL and to the east coast.

So, they are doing just that...As Dave said, you have to look at the Santana deal to start off with and the Yanks are going to have to spend more than that to get him.

Melvin needs to get over it...This sounds like jealousy to me..Yes, this does suck and I wish something could be done about it but nothing can, so either the Brewers can offer more money or move on and go after someone else.

I disagree. The have-not and have-less teams outnumber the have-too-much teams, probably 24-6. At worst, 20-10. If they would simply get their act together, and push through more stringent revenue-sharing rules, this kind of stuff would happen less frequently.

Since the teams with less seem perpetually inclined to roll over for the teams with more, we're reduced to hoping that Hank $teinbrenner is as much of a raving lunatic as his public pronouncements make him appear. The problem of the Red $ox, however, remains more complex, as no one in their ownership group appears to be insane.

[byrdz]

Welcome to present day baseball Milwaukee! Where have you been hiding?!?

[mweb]

Well it's obviously not $140M upfront, so yes, most of the money is deferred.

The deferment mechanisms may not be identical of course, but the point remains that the Yanks' offer is worth less than $140M in present value terms. How much less, none of us can say.

And that's obviously not what I meant.

[davearm]

And that's obviously not what I meant.

Well hopefully we can agree that the appropriate point of comparison is not $140M vs $123M.

If you're going to deflate Santana's $137.5M and call it $123M NPV, then some deflation needs to be applied to Sabathia's $140M as well.

[mweb]

Well hopefully we can agree that the appropriate point of comparison is not $140M vs $123M.

If you're going to deflate Santana's $137.5M and call it $123M NPV, then some deflation needs to be applied to Sabathia's $140M as well.

Not sure I can agree...

"$5M deferred annually at 1.25% compound interest (payable June 30 seven years after season in which salary was earned), reducing present-day value of package to $123.1M"

From Cot's.

So that's a lot different than saying CC will make $24 million in 2014, but that's less in present day value.

Plus the potential buyout is included in that $137.5M, it's really $132M plus an option.

I'm not a financial expert, so I don't know exactly how that breaks down compared to just getting paid your entire salary each year.

[davearm]

Not sure I can agree...

"$5M deferred annually at 1.25% compound interest (payable June 30 seven years after season in which salary was earned), reducing present-day value of package to $123.1M"

From Cot's.

So that's a lot different than saying CC will make $24 million in 2014, but that's less in present day value.

Plus the potential buyout is included in that $137.5M, it's really $132M plus an option.

I'm not a financial expert, so I don't know exactly how that breaks down compared to just getting paid your entire salary each year.

Let me see if I can make this a little clearer.

To get to a NPV of $123M for the stream of payments specified in Johan Santana's contract, as outlined in Cot's including the deferment schedule and interest rate, implies a discount rate of 2.5%.

Now if we were to take away the deferment schedule, and give Santana all of his salary in years 1 through 6 plus the buyout in year 7, and discount that stream of payments using that same discount rate of 2.5%, we'd come back with a NPV for the deal of $125.3M. So the deferred payments decrease the value of the deal by roughly $2.3M in present-value terms.

Now let's turn to Sabathia. If we assume the Yanks' 6/$140M deal specifies equal, $23.33M salaries in every year, and we discount at 2.5%, then the NPV of the thing is $128.5M. If the deal's backloaded similarly to Santana's then the NPV drops a hair to $128.0M.

So I guess what I'm saying here is the relevant point of comparison, using present value dollars and assuming the Yankees are not deferring any money like the Mets did, but are doing some gradual backloading like the Mets did, is $128M vs. $123M.

Not a lot different than the nominal dollars of $140M vs. $137.5M, in other words. The larger point remains, if you're going to look at present value dollars on one side, you have to do the same on the other, or else you're comparing apples and oranges.

Hope this helps.