What You Might Have Missed About The Max Scherzer-Washington Nationals Deal

It appears Scott Boras has once again created value for one of his clients. Max Scherzer on Wednesday signed a $210 million, seven-year deal with the Washington Nationals, the largest ever for a right-handed pitcher.

Half of the contact's amount ($105 million) will be deferred to 2022-2028. Call it old-fashioned thinking, but the popular saying "you can pay me now or pay me later" did not factor in Boras' calculations when crafting this deal.

The Nationals offer ended up being $66 million more than seven-year offer from the Detroit Tigers (Scherzer's home the last five seasons) last spring, but what may be being ignored is the concept of the "time value" of money,

This article will analyze the deal from an investing standpoint, as well as highlight the potential pitfalls for the Nationals and Scherzer.

Deferred Money

The deferral payment automatically devalues a portion of the $66 million discrepancy.

The true value of the $66 million could be undermined by any period of rampant inflation or another unforeseen economic event in the latter half of the contract.

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What Is The True Time Value Of Money?

In addition, what could be the expected returns of the Tigers deal be if invested properly? By having $144 million paid out over seven years, Scherzer would be able invest the funds as he choose fit and could exceed the $210 million by 2028.

The way deal is structured now, not only will the Nationals will be his employer, but his investment advisor as well by dictating his returns on the remaining $105 million. Along these lines, the organization will be able to invest a much smaller amount of money in an annuity to provide the return guaranteed to Scherzer in the back half of the contract.

Risk To Nationals

So what do the Nationals get for this hefty investment? One of the game's best arms over the last few years (Scherzer won the Cy Young award in 2013.) However, that arm has one complete game over his seven-year career. That may not be as much of a factor in the National League (no designated hitter, frequent pitching changes), but his lack of stamina is noteworthy. With Scherzer being 37 years old by the final year of the contract, this statistic is not likely to improve as he ages.

Scherzer has also been relatively injury-free throughout his career, but that can change in a heartbeat, especially when he ventures out into the base paths now that he's in the National League.

For now, Boras has grabbed the headlines with another blockbuster deal for one of his clients -- tax manager Robert Raiola calculated that Scherzer will make $80,000 "per MLB in-season day for the next 14 years."

However on this occasion, a Boras-negotiated contract might require a little further reading.

Image credit: Keith Allison