$500,000 ball deal is $300,000 annuity Analysis: Dan Jones, the man who caught the 500th Eddie Murray home run ball, will collect $25,000 a year for 20 years from a $300,000 annuity.

September 27, 1996|By Jon Morgan | Jon Morgan,SUN STAFF

If you found it impossible to believe that someone had spent $500,000 for a baseball, you were right. No one did.

Infomercial tycoon Mike Lasky actually paid $300,000 for the ball that Eddie Murray hit for his 500th home run. Under the terms of his agreement with Dan Jones, the Towson marketing man who caught the ball at Camden Yards, Lasky gave Jones an annuity that will pay him $25,000 a year for 20 years.

While that does add up to $500,000, it's not the same thing as getting a half-million dollar check, according to financial experts. They say the ball's price is really the $300,000 that Lasky paid for the annuity.

"It's not a $500,000 baseball because of the effect of the time value of money," said Lisa Fairchild, an assistant professor of finance at the Sellinger School of Business and Management at Loyola College in Baltimore.

"Time value" accounts for the investment potential of money. The idea is that $100 invested today begins earning interest immediately. The same $100 invested next year will earn one less year's return, and will always be worth that much less.

Or, as Fairchild says, "A dollar today is worth more than $1 tomorrow."

Indeed, had Jones received $300,000 in cash and invested it in Treasury bills paying 6 percent a year, he would end up with $962,130 in 20 years. Putting the money into another investment vehicle, such as a fund that invests in stocks, could double the proceeds easily, Fairchild said.

Of course, that assumes Jones doesn't touch the money for 20 years and lets the interest compound. Under the annuity plan set up by Lasky, Jones will have a healthy income he can count on and presumably use as collateral for a loan if he needs money for a house or new car.

The same principle generally applies to the mammoth winnings reported by the Publishers Clearinghouse or the lottery that are advertised at one price but paid out in guaranteed annual chunks.

"You really don't win $10 million. You're getting much less," Fairchild said.

Of course, there are tax advantages to Jones in getting his

money in installments rather than all at once. Spreading out the payments probably keeps him in a lower tax bracket and results in less total taxes paid, said Tom H. Regan, assistant professor of sports business at the University of South Carolina at Columbia.

"He's much better off this way," said Regan.

But the ball's price is still $300,000, he said. "What [Lasky] has done is buy the ball for $300,000. The question is, is that ball worth it?" Regan said.

Richard Kolodny, chairman of the finance department at the University of Maryland at College Park, agrees that Murray's ball, while earning Jones a bundle, didn't earn quite the bundle it seems.

"It's certainly not a $500,000 ball in my mind. It is today's value that is important," Kolodny said.

Robert Urban, the Maryland-based memorabilia dealer who goes the name of "Mr. Memorabilia," said the price for the Murray ball should probably be expressed as $300,000. And that's believed to be a record for a baseball. But Urban is still hoping to get $1 million in cash for the home run ball Cal Ripken Jr. hit on the night he tied Lou Gehrig's consecutive-game streak.

But, he acknowledges, "Everything in the world is negotiable. So far, nothing is on the table."

Lasky intends to display the Murray ball either at the Baseball Hall of Fame in Cooperstown, N.Y., or the Babe Ruth Birthplace Museum in Baltimore.

Pub Date: 9/27/96

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