A-Rod: Signing the Best Player in Baseball
Harvard Business School Case No.: 203-047; Teaching Note No.: 203-091
Posted: 13 Sep 2004
Date Written: September 23, 2002
SUBJECT AREAS: Assets, Brand management, Cash flow, Cash management, Finance, Financial analysis, Insurance, Investments, Present value, Product management, Regression analysis, Service industry, Sports, Statistical analysis, Valuation
CASE SETTING: Texas; sports/entertainment; $126.5 million revenues; 200 employees; 2000
Analyzes a large investment decision considered by the Texas Rangers in 2000: whether to spend $252 million for the services of shortstop Alex Rodriguez. The signing was probably the most controversial sports contract of the past decade.
Teaching Purpose: 1) To teach students to evaluate a complex investment decision - the signing of the largest player contract in baseball history (was $252 million too high a price to pay?) - as well as to look at regression analysis, complex conditional cash flows, and discounting; and 2) to consider the difference between correlation and causation, the nature of insurance, and the long-run benefits of brand improvement.
Suggested Citation: Suggested Citation