A Rod Case Study Essay

779 Words May 12th, 2011 4 Pages
Southwest Sports Group Contract for Alex Rodriguez:

The 10 year contract which Tom Hicks and his team proposed for Alex Rodriguez was one of the biggest ever in the history of Baseball. It was a major Investment decision for the group. The Group had taken over the Dallas Stars few years earlier and spent on buying quality players. This worked wonders for the team and Dallas Stars went on to lead the group. Tom Hicks had a policy of spending 50-55% of team revenue on team payrolls. If that is maintained he always gains an operating profit of 10-15%.

Texas Rangers can bring more revenue to the group if they reach the American Championship Series and
By reaching the seventh game of the World Series could add over $20 million in
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Present Value for Sponsorship Deals: 2 Million Dollars.

Assume the average number of attendees increase from 71% to 85% due to A Rod Factor.

Therefore adding all the benefits we get the amount

According to the collective bargain agreement 20% of the local revenues are given to a common pool. We assume that 45% is given back to Texas Rangers after the funds are shared.

Profit of Texas Rangers:

Immediate Benefits – Expense (A Rod Contract) =$39.91-$29.4M=$10.51M

2. Present Value for Sponsorship Deals: 4.55Million Dollars.

Assume the average number of attendees increase from 71% to 85% due to A Rod Factor

Therefore adding all the benefits we get the amount

According to the collective bargain agreement 20% of the local revenues are given to a common pool. We assume that 45% is given back to Texas Rangers after the funds are shared.

Profit of Texas Rangers:

Immediate Benefits – Expense (A Rod Contract) =$12.3M-$29.4M=-$17.4M

3. Present Value of Texas Rangers reaching American League Series: $9.35Million Dollars.

Present Value of Texas Rangers securing seventh place in the World Series = $18.46Million Dollars.

Present Value for Sponsorship Deals: 2 Million Dollars.

Assume the average number of attendees increase from 71% to 85% due to A Rod Factor

(i)Profit of Texas Rangers:

Immediate Benefits (American League Series) – Expense (A Rod Contract) =

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