1. A-Rod
Case Study
Daniel O’Reilly
Cambria Wallrich

2. Chicago Tribune Company
Sold to Media mogul Sam Zell for $8.2 billion.
Tribune company purchased Cubs in 1981 for $20.5 million.
Today’s estimated value of $600 million

3. How much have they appreciated?
Worth $247 million in 2001, worth $600 million today
A %
B %
C %
D %

4. Answer:
PV= -247
FV= 600
PMT= 0
N= 6
CPT= I/Y
15.94%

5. 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 & Gatorade’s national baseball student athlete of the year

6. 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 -

7. 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

8. 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%

9. How A-Rod Opened the Door

10. Money Ball Oakland A’s: $26 million payroll Doug Pappas: Won 102 games
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

11. What are teams worth today?

12. 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?

13. Answer: 0.529% PV= - $342 million FV= $353 million PMT= 0 N= 6
CPT= I/Y
0.529%

14. Do you think the $252 million offer was justified?
Conclusion:
Do you think the $252 million offer was justified?
What would you offer A-Rod today?