Cases in Financial Decision-Marking

Case Study:

 A-Rod:  Signing the Best Player in Baseball

Suggested Assignment Questions

:

6.

Will the signing of Rodriguez increase the sale price of the Rangers?  If so, what is

pre-tax present value?  Assume that the Rangers would be sold in 10 years, right after

the expiration of Alex Rodriguez’s contract.  Hint:  Run a Discount Cash Flow (DCF) analysis,

computing the incremental benefits – line item by line item -- against the incremental

expenses – line item by line item.  

7.

Should the Texas Rangers sign Alex Rodriguez?  If you find that the pre-tax present value

of the incremental costs exceeds the pre-tax present value of incremental benefits, how

much would ticket prices need to increase for the Rangers to break