From an earnings perspective you would nearly always prefer to get 8.3/8.3/8.3 vs 5/5/15. There's a couple of reasons for this. 1) Declining value of money. Any dollar you make today is worth more than dollars you make tomorrow. Inflation makes this a fact. At 5% inflation, your $1 this year is only worth $0.95 in today's dollars next year, and $0.90 in today's dollars in 2 years. If you made $8.33/8.33/8.33, if you assume 5% inflation, in today's dollars that deal is worth $8.33 + $7.92 + $7.52 = $23.77m. If you made $5/5/15, in today's dollars that deal is worth $5 + $4.75 + $13.54 = $23.29m Back loading the deal will probably cost Lin 500k+ just due to inflation. 2) Opportunity cost. Lin having the money back loaded means that $3.33M is NOT available each year for him to invest or use for the first 2 years. Even if he put it in a CD at 2%, $3.33M in the first year would earn $66,600 in interest before taxes. Add another year of compounded investment return, and an additional $66,600 from the 2nd year of $3.33M deferred and you're looking at close to $200,000 in opportunity cost at 2% return prior to paying income tax. This is assuming of course that Lin couldn't find a proper financial adviser to earn him a more reasonable return. In a nutshell, having his pay deferred is probably worth somewhere between $500,000 and $1m in take home pay for Lin (depending on deductions and investment earnings). You tell me if he'd rather have it up front or deferred?
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This is true, and I would also like to add another thing to the mix. Without Lin, Dwight would not have signed with us. While Dwight didn't come here to play with Lin, he would not have signed with us either had we not make the playoffs last year. Without Lin we would have finished 6 games out of the playoffs, and thus Howard would have looked elsewhere to play. Of course the loons will continue to harp how this or that PG is better than Lin. I think at the end of his career he will go down as a solid player in the league and many people will still doubt him.
Some people still haven't figured out that PG's can't thrive in Houston. System is not built for them. Not a coincidence Lowry and Dragic are better players now than when they were in Houston. Same thing with Lin.
Wow, even though Lin had 10 assists, and got a double double, he gets no mention in the ESPN game "recap", while \each of the starters and DMo gets a mention.
You're assuming that the Rockets couldn't have found a 1 to play as well as Jeremy did last year. I'm not going to rip Lin's play last year to make my point. Still, your argument is flawed because you assume the Rox would have been worse when there's no way of knowing. Jeremy's a good player. But as usual some people can't see the Rockets as a group and focus on Jeremy.
Present value of the contract is greater if they get 8.3, 8.3, and 8.3 than if they get the last 15m lump sum in the last year. Lin with a degree in economics at Harvard should know this.
Just curious, who were the available free agent point guards that year. I remember we lost all our guards... but can't remember who else was available. I guess Felton was on the market that year too....
ding ding ding, we have a college graduate here, if the tax implications are consistent, then the time value of money states that cash today is worth more than cash in the future...hell if Lin got 25 mil upfront he would have invested that and out gained the S&P
