Phoenix LXVI: Get Your Kicks On Thread LXVI
View Single Post
12-17-2012, 06:51 PM
Join Date: May 2006
Originally Posted by
You forgot one very important expense- cost of capital! The money needed to purchase the team costs a lot of money each year. Lets just say that it is junk bond quality so a cost of capital could well be 5-8%. At 5%, the cost of the money is ($170MM purchase price) is 8.5MM per year. The coaches and and a skeleton staff still cost $6MM++ so tell me where is GJ making money without his team playing? Real answer: he isn`t!!!
Coaches and staff at $6 mil? Really? You must have missed where there is basically no one working there.
Also let's be more realistic about the numbers. The "cost of money" you disregard the capital contribution because those are a sunk contribution. The investors think they will get a return based upon the team profits, not a specific interest rate. higher risk but more theoretical upside. If the cost of borrowing is 7% on 100, mil, that is $7 mil per year. Lets say other expenses are $4 mil per year. That is $11 mil per year.
Based upon the contract, his buying the team now will result in a penalty for all games not played while he owns the team, not for the entire season. So let's say that is 30 total games at 60k per game. $1.8 mil. That is 12.8 mil. He gets what, 12 mil the first year? so he loses 800k but owns the team, gets the public in the area behind him, builds credibility, good will, relationships with the area, starts booking other acts that are profitable for the arena, etc. I fail to see the downside of purchasing the team immediately. Hence, no money.
View Public Profile
Tommy Hawk's albums
Find More Posts by Tommy Hawk