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An NFL player just signed a new 3 year contract with the Indianapolis Colts. Under the...

An NFL player just signed a new 3 year contract with the Indianapolis Colts. Under the contract, his base salary will be $5 million in the first year, $7 million in the second year and $9 million in the third year. In addition, his contract calls for a $4 million signing bonus up front. His contract provides LTBEs that could amount to $500,000 each year. Anticipate the NFL player being with the Colts for the entire contract.

How much of the salary will count against the team’s salary cap each season?                 1st year:__________             2nd year:_____________              3rd year:______________

How much will the player be paid each year?                                                                      1st:___________                2nd:___________             3rd:____________

How much is the entire contract worth to the player?      _______________

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Answer #1

player be paid each year?

Salary + Benefits

Contract fee salary benefits Total $'000
Year1 4,000,000 5,000,000 500,000 14,000
Year2 7,000,000 500,000 7,500
Year3 9,000,000 500,000 9,500
total 21,000,000 31,000

Total Worth of player

Time value of money is need to be considered for assesing contracts value. Or the contract will be worth :$31,000,000..ie,$31M

Total cash flow(including benefits) Discount factor@ Present Value
Year1 14,000
Year 2 7,500
Year3 9,500
Total 31,000

salary will count against the team’s salary cap each season

Teams salary Cap per year is not given so only can estimate how much will effect against cap per year. Consider only salary not any benefits.

Salary Cap NFL salary Net Cap remaing
Year 1 $5M
year 2 $7M
Year 3 $9M
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