There has been a lot of talk lately about the Red Sox budget for players. From my understanding, the Red Sox have said that they can support a payroll of approximately $140M. This seems very reasonable since they have a payroll of $143M in 2007.This leads me to the question of what is done with the money when they are under $140? Companies essentially have 3 options for spending cash; 1) reinvest in the company 2) save the money or 3) give the money to ownership. I believe that they Red Sox are no different.
Over the past 2 season the Red Sox have come in under the $140M level (about 18.2M and 6.7M respectively). Let's assume that the Red Sox put this money in a savings account getting a reasonable .04 interest rate. That would mean today they would have over $26M extra to spend on players. If you continue using the time value of money you'd see that the Red Sox could actually support a payroll of $145M over the next 5 years without increasing their net spending.
This may be completely off-base and slightly convoluted but the overriding put is this, why are we (as fans) spending more money and not seeing a better product? Even with these new signings the Red Sox will still only have a budget around $130M. Either they are saving the money and we should see the rewards for being patient or they have spent it on themselves.