About two or three times a year, someone will forward a link reminding me the Mets continue to pay Bobby Bonilla until the end of human existence. However, Business Insider’s Cork Gaines is one of the first to point out the Mets’ decision to pay Bonilla $29.8 million spread over 25 payments starting in 2010 rather than the $5.9 million he was owed in 2000, actually turned out well for Fred Wilpon.
If Bonilla had accepted the $5.9 million in 2000 and invested the entire amount at 8% interest, the original investment would have grown to $104.1 million by 2035* (blue line in chart below). If instead, Bonilla takes his annual payment and invests that with an 8% annual return, he would have $95.2 million by 2035 (orange line in chart below).
In other words, Bonilla lost nearly $10 million by taking the payments instead of the lump sum.
But more importantly to the Mets, if they invested the $5.9 million at 8% interest in 2000. That money would have grown to more than $14 million before they had to make a single payment. And that money would continue to draw interest even while they are making payments.