A-Rod Case Study Daniel O’Reilly Cambria Wallrich
Sold to Media mogul Sam Zell for $8.2 billion. Tribune company purchased Cubs in 1981 for $20.5 million. Today’s estimated value of $600 million Chicago Tribune Company
Worth $247 million in 2001, worth $600 million today A. 15.94% B. 14.22% C. 12.86% D. 18.27% How much have they appreciated?
Answer: • PV= -247 • FV= 600 • PMT= 0 • N= 6 • CPT= I/Y • 15.94%
Born in the Washington Heights section of NYC Moved to Dominican Republic at age 4, Miami at age 7 Star shortstop at Westminster Christian High School in Miami .419 average, 90 steals USA Baseball Junior Player of the Year & Gatorade’s national baseball student athlete of the year A-Rod Biography
A-Rod turned down a scholarship at Miami of Ohio to become eligible for the amateur draft at 17 Drafted first overall by Seattle Mariners Major League debut as shortstop- July 8, 1994 vs. Boston A-Rod Biography (cont.)
A-Rod In Dec. 2000 A-Rod is a free agent Texas Rangers want to make an offer for a 10 year contract to leave the Mariners The Rangers 1971 Washington Senators moved to Arlington, Texas and renamed the Rangers The Ballpark at Arlington holds 49,200 fans per game The Rangers play 81 home games per season Intro to the case:
Plan: Spend considerable resources to get A-Rod to improve quality of the team and risk short term losses Long Run: A championship team would be in place to boost profits and franchise value as well as attendence The Contract: 10 year, $252 million, $10.2 million above the next highest paid player Kevin Brown at $15 million Salary paid in a base rate plus signing bonus of $10 million paid over 5 years Portion of compensation deferred for 10 years at 3%
Money Ball • Oakland A’s: $26 million payroll • Won 102 games • Doug Pappas: • Minimum Payroll- $7 million • Minimum Victories- 49 games • Measure of financial efficiency- how much do you pay for each additional win? • Oakland: $500,000 Texas: $3,000,000
What effect has the Alex Rodriguez had? Texas pays $67 in buy out. Texas Rangers value increased from $342 million to $353 million What rate did they increase? A. 5.3% B. 1.2% C. .53% D. 2.1% Question:
PV= - $342 million FV= $353 million PMT= 0 N= 6 CPT= I/Y 0.529% Answer:
Conclusion: • Do you think the $252 million offer was justified? • What would you offer A-Rod today?