Buy Out Question re: Payment Schedule

[breignchile]

From what I gather a player who is bought out can negotiate a payment schedule. Can somebody please elaborate on the limitations to this. Also, can somebody who is well versed in accounting speak to the pros/cons of being paid upfront (lump sum) and over a long period of time 10+ years.

Thank you for any insight you can provide.

[LarryCoon]

I don't know if there's any maximum. I suppose a player owed $1 million can agree to be paid $1/month for a million months -- not that they'd ever do that. At the other end of the spectrum, the minimum time over which it can be spread is zero -- a lump sum payout.

I'm not "well versed in accounting," but the principle of present value of money is pretty well understood. Generally a dollar is worth slightly more today than it will be a year from now. So for a hypothetical $1M payout, the highest net value comes from getting it all in a lump sum. The longer payments are spread out, the lower the next value.

Here's something on the present value of money: LINK