You have to pay attention to the 1st contract b/c of several factors. One is the time value of money of course, but also the fact that risk/variance in outcome goes up as we go forward in time. The uncertainty of the 2nd contract should push me to a higher rate on it, but it would be better to value it in a binary branch model. what that means is the 1st conrtract's value is amplified by its relative certainty.
It also depends on which one we're talking about. The #30 contract is worth $4.5 million in discounted dollars, not a "lot" as you said, but the #1 contract is $20.4 million. that's a LOT of money regardless of 2nd contract. Even assuming the big monster contract of $8m/yr for 5 years, top tier money, that 1st contract is still 42.95% of the 9 year NPV.
Another factor we haven't discussed is marketing/endorsements. A player who has contributed more for 3 years has more fans, more shoe interest, etc. which is all valuable to a franchise. If year 3 looks good but is basically your rookie year for the fans your off court value is likely to be lower.
But in general we agree. You have 3 years to make your case for a 4th and that big 2nd contract. No doubt doing the things that maximizes your contribution and value in year 3 are very important. I also agree versus a lot of schools the NBA may be a better environment to develop, but not versus UK. No pro team can beat what we have, and no NBDL facility can hold a candle to it for staff or resources.
Just for kicks I ran the 1st contract % of total NPV in my 9 year contract calculation, again with the $8m/yr 2nd contract for 5 years.
Pick 1st % of Total 1 43% 2 40% 3 38% 4 35% 5 33% 6 31% 7 29% 8 27% 9 26% 10 25% 11 24% 12 23% 13 23% 14 22% 15 21% 16 20% 17 20% 18 19% 19 18% 20 17% 21 17% 22 17% 23 16% 24 16% 25 15% 26 15% 27 15% 28 15% 29 14% 30 14%
Bookmarks