To figure the NPV of the contract, you need to estimate the risk-free rate, not the rate of salary growth. If Pujols thinks baseball contracts are going to increase 10% a year indefinitely, then he should sign for one year, not ten. I was just using that to show that the baseball teams earn more than 3% on their money. Even in this economy I assume 5% for 10 years and we don't get the returns that baseball does. 10-year treasury bill rates are not at 5% anymore. The returns that baseball gets are not relevant. They are not risk-free. Some would argue that a truer indicator of the risk-free rate would come from a 3-month t-bill. Those are well under 1%, and have been for a few years now. By using the risk free rate, I think you're a underestimating the value of back loading a contract. You should use all the information available to make assumptions to come up with a better estimate. IMO, you should use at least 5%. But I think your initial point was that if you pay more initially but defer payments after the 10 years it will be about the same as just giving a flat amount every year, and whatever interest rate you use, won't have much of an effect on that.