The Levitt report shows NHL revenues at 2.094 billion in 1998, throughout the lockout, the owners claimed that players were receiving 75% of the revenue. When the new CBA settled, players revenue was reduced to 54%.
(a) The new contract lasted 6 years long. Using the information above and assuming an interest rate of 5%, calculate the owner's gain from this concession.
(b) Assume the owners' loss in a season was 335 million, and assume costs of fan irritation from the lockout is equal to owners' next best alternative, calculate the owners' break-even probability. Explain your results.