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Monday, December 05, 2011
“He won’t be worth it in the last two years of his deal”
Please don’t say sh!t like that. This is the reason:
http://www.insidethebook.com/ee/index.php/site/comments/remaining_value_of_contracts/
If you want to evaluate Reyes’ deal, evaluate it in its entirety. Otherwise, you are giving the Marlins no credit for possibly getting him on a discount for the first three years, but then knocking them for the huge premium in the last two years. This is the implicit valuation of Reyes by the Marlins:
Year Wins $perWin $Value $Cost $Gain(Loss)
2012 4.44 $5.00 $22.2 $17.7 $4.5
2013 3.94 $5.25 $20.7 $17.7 $3.0
2014 3.44 $5.51 $19.0 $17.7 $1.3
2015 2.94 $5.79 $17.0 $17.7 $(0.6)
2016 2.44 $6.08 $14.8 $17.7 $(2.8)
2017 1.94 $6.38 $12.4 $17.7 $(5.3)
So, the Marlins of valuing him as a 4.44 win player in 2012, dropping by 0.5 wins each year. They also have the value of a win at 5MM$, and increasing that value by 5%.
The net result is that under these assumptions, Reyes will provide a net gain in the first 3 years, a net loss in the last 3 years, such that, overall, he’ll be worth 106MM$.
Now, you can go even further and turn this into present value dollars if you like.
But, never, ever, ever, talk about things like he’ll be a net negative in the last two years of his (or anyone’s) deal. That’s a “duh” statement. That’s because Reyes, like all people, are human, and their bodies will break down.
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