This came up yesterday but always worth torturing Mets fans with...from Espn. In case you forgot or blocked this out...
Bobby Bonilla, New York Mets The Mets are still paying for the mistake of signing Bobby Bonilla in 1992 … and they will be for a long time. Bonilla struck a deal with the team in 2000 in which it purchased an annuity rather than pay him the remaining $5.9 million of deferred money that he was owed. So every July 1 from 2011 to 2035, Bonilla will receive $1.19 million, with the total payments adding up to nearly $30 million.
2035. Twenty thirty five. When the Mets honor the 2010 champions with their 25th anniversary, when 53 year old David Wright throws out the first pitch on Opening Day, when the Mets finally give in and erect a statue of Tom Seaver....Bobby Bonilla will be getting $1.19 million.
I'm confident the economics of doing it this way make sense but......Twenty.... thirty.... five.
That $19 hot dog that Mets Police Junior will buy Mets Police the Third.....Bonilla gets a cut.
By the way, I hope they plan on doing something 'next year' for the 50th anniversary of 1986. Never too early to start nagging the Wilpon Dynasty.
While it seems bad taken at face value (honestly, who pays a guy who hasn't been part of the team for 35 years!), it's actually not THAT bad of an investment decision.
Using the time value of money, $5.9M in 2000 has a very different value than $30M in 2035. If you calculate the value of the annuity in 2010 dollars, then convert that back to 2000 the difference is a wash as long as the expected return on the initial $5.9M is 4.5%. If the expected return is more that 4.5%, delaying the payment is a good deal, if it is less, paying it upfront makes more sense.
In most cases, 4.5% is a pretty average return on diversified investments to the decision is a wash. Knowing the history of the Mets, their expected return on $5.9M is probably much less than 4.5% (and probably negative -- Madoff anyone?) so they should've just paid him in 2000!
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