A-Rod

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A-Rod Case Study Daniel OReilly Cambria
Wallrich
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Chicago Tribune Company

• Sold to Media mogul Sam Zell for 8.2 billion.
• Tribune company purchased Cubs in 1981 for 20.5
  million.
• Todays estimated value of 600 million

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How much have they appreciated?

• Worth 247 million in 2001, worth 600 million
  today
• A. 15.94
• B. 14.22
• C. 12.86
• D. 18.27

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Answer

• PV -247
• FV 600
• PMT 0
• N 6
• CPT I/Y
• 15.94

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A-Rod Biography

• 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
  Gatorades national baseball student athlete of
  the year

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A-Rod Biography (cont.)

• 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

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Intro to the case

• 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

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• 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

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How A-Rod Opened the Door
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Money Ball

• Oakland As 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

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What are teams worth today?
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Question

• A. 5.3
• B. 1.2
• C. .53
• D. 2.1

• 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?

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Answer

• PV - 342 million
• FV 353 million
• PMT 0
• N 6
• CPT I/Y
• 0.529

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Conclusion

• Do you think the 252 million offer was
  justified?
• What would you offer A-Rod today?