A Professional Sports Team and Related Items (Including a Stadium)were

question 23

Essay

A professional sports team and related items (including a stadium)were bought by an exceedingly wealthy investor and sports fan. The negotiated price was $225,000,000. Details of what was purchased and the agreed fair values are as follows:
$$\begin{array} { | l | r | } \hline & \begin{array} { r } \text { Fair value in } \$ \\\text { millions }\end{array} \\\hline\text { Stadium }&70 \\\hline \text { Land } & 20 \\\hline \text { Cable TV broadcasting contract } &9 \\\hline \text { Player contracts } & 31 \\\hline \text { Spectator leases on luxury viewing boxes } & 9 \\\hline \text { Product licensing agreements } & 17 \\\hline \text { Season ticker subscriber list } & 18 \\\hline \text { Contacts and commitments for use of stadium } & 27 \\\hline \text { The "team" imputed or residual value } & \underline{24}\\\hline \text { Total } &225 \\\hline\end{array}$$ The team has been less than successful in its professional sports league and has been recording losses of $1,000,000 to $8,000,000 per year on its audited financial statements for the past five years. It was these losses that prompted the last owner to sell the team and related assets.
Required:
a. Of the $225 million purchase price, how much of it relates to tangible assets? What percentage of the purchase price relates to tangible assets?
b. Describe the nature of the future economic benefits associated with each of the intangible assets acquired. For example, for the cablevision broadcasting contract, this would be the present value of the future payments expected from contracts for the broadcast of games on cablevision channels plus potential renewal contracts thereafter.

Analyze the notion of preferential payments and their consequences in bankruptcy proceedings.

Comprehend the roles that creditors and trustees play in the bankruptcy process.

Understand the implications of involuntary bankruptcy filings and how they are treated.

Describe the goals of bankruptcy laws and the general procedures followed in bankruptcy cases.

---

Definitions:

Perfectly Mobile

Refers to resources or labor that can move without restriction or barriers between areas to find employment or investment opportunities.

Output Per Worker

The amount of goods or services produced divided by the number of employees, a measure of labor productivity.

Physical Capital

The tangible assets such as buildings, machinery, and equipment used in the production of goods and services.

Human Capital

The collective skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value to an organization or society.