Real-Life Math
In any career, you want to be paid well for the job you do. So suppose you are a professional boxer and you have been approached to fight Michael Jones, a rival in your weight class.
The fight is scheduled to happen in Caesar's Palace in Las Vegas. Whether you win or lose, you gain excellent exposure, and you have wanted to fight Jones for over a year. You know he will probably beat you, but you consider the loss an opportunity to learn from the best. All you need to decide is which of the two salary options you have been given will pay you the best.
The promoter who is lining up the fight has given you the choice of getting a percentage of the ticket sales, and matching any bonuses from your sponsors, or receiving a flat fee.
In the percentage deal, you will get 15 percent of the ticket sales, plus the promoters will match your bonuses from your sponsors. The Palace seats 1,200 people, and the ticket price is $42 per seat. According to the promoter, you can expect an average of 80 percent of the seats to sell.
Additionally, 2 sponsors will pay you bonuses. Your glove sponsor will pay you $1,500 if you win and $500 if you lose. Your shoe sponsor will pay you $2,000 if you win and $700 if you lose. The promoter will match these expenses.
Your other option is to accept a $10,000 flat fee for the fight, win or lose, with no bonuses from the sponsors. Which is the better deal?