FanPost

How much should Mikko make?

Since the Marner contract, most have started freaking out a bit about the numbers. Let's put it in a little more perspective for discussion purposes.

We can't just look at the base salary and say player A is pretty much the same as player B; therefore, player B must make around the same as player A. In case your wondering, player A is Marner (A stands for asshole... Paul, not Mitch) and player B is Rantanen (B stands for Badass Mofo). Instead, we must also account for taxes, bonuses, and the time value of money.

First, a quick Google reveals that there is a significant difference in net pay for income earned in Colorado vs Toronto. Specifically, one will take home roughly 57% of their gross in Colorado and 47% in Toronto. I started with this but made a back of the envelope adjustment to the Toronto rate due to games played on the road. In the end, my assumptions were a take home rate of the same 57% for Colorado and 51% for Toronto. We can scrutinize this quite a bit further if we want to, but I think it's close enough for discussion purposes.

Next, aside from making a simplifying assumption that pay comes quarterly, I modeled Marner's contract exactly as it relates to bonuses and salary. I also left out escrow for simplicity sake. For Rantanen, there is no contract, so I just made one up. It has a $10M signing bonus in year one and a $6M bonus in year two. The rest is spaced evenly.

Using all of these assumptions and a 2% discount rate (on a quarterly basis), I plugged everything into Excel and used the NPV function. Here is what I came up with. Long story short, a little wiggle on the bonuses for Rants in years one and two goes a long way, and it makes a $9.2M AAV contract come really close to Marner's in terms of present value on take home pay (the difference is around $1.6M for the entire contract). Is this exact? No, but it paints a more accurate picture than just the raw numbers.

Feel free to scrutinize it, ignore it, or whatever. I think it's useful, but if you disagree then fine.

Apologies, but I don't know how to paste this so calculations are transferable to Excel. You can recreate them though if you're so inclined.

Marner Salary $ 10,893,000 Rantanen Salary $ 9,200,000
Pretax After-Tax (Toronto) Pretax After-Tax (Colorado)
PV $59,801,850 $28,056,032 $50,431,886 $26,367,565
July (bonus) 1 15,475,000 7,892,250.00 12,300,000 6,996,240.00
Oct 2 175,000 89,250.00 1,572,727 894,567.27
Jan 3 175,000 89,250.00 1,572,727 894,567.27
Apr 4 175,000 89,250.00 1,572,727 894,567.27
July (bonus) 5 14,475,000 7,382,250.00 8,300,000 4,721,040.00
Oct 6 175,000 89,250.00 1,572,727 894,567.27
Jan 7 175,000 89,250.00 1,572,727 894,567.27
Apr 8 175,000 89,250.00 1,572,727 894,567.27
July (bonus) 9 9,795,500 4,995,705.00 1,572,727 894,567.27
Oct 10 187,500 95,625.00 1,572,727 894,567.27
Jan 11 187,500 95,625.00 1,572,727 894,567.27
Apr 12 187,500 95,625.00 1,572,727 894,567.27
July (bonus) 13 7,437,500 3,793,125.00 1,572,727 894,567.27
Oct 14 187,500 95,625.00 1,572,727 894,567.27
Jan 15 187,500 95,625.00 1,572,727 894,567.27
Apr 16 187,500 95,625.00 1,572,727 894,567.27
July (bonus) 17 7,437,500 3,793,125.00 1,572,727 894,567.27
Oct 18 187,500 95,625.00 1,572,727 894,567.27
Jan 19 187,500 95,625.00 1,572,727 894,567.27
Apr 20 187,500 95,625.00 1,572,727 894,567.27
July (bonus) 21 7,437,500 3,793,125.00 1,572,727 894,567.27
Oct 22 187,500 95,625.00 1,572,727 894,567.27
Jan 23 187,500 95,625.00 1,572,727 894,567.27
Apr 24 187,500 95,625.00 1,572,727 894,567.27
Average Tax Rate 49.00% 43.12%

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