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Maybe the report already discounted the future cash flows? I agree it would be pretty ridiculous if they didn’t.
by sharedbeans 3y ago
Maybe the report already discounted the future cash flows? I agree it would be pretty ridiculous if they didn’t.
- didgeoridoo 3y agoSo when the report says “10 times what they paid”, it means “10 times the amount the $1B would be worth in 75 years at the currently-forecasted risk-free rate of return”? I can’t imagine that’s true, but who knows I guess.
- Retric 3y ago10 times the inflation adjusted number seems to be the implication. However, the company receives money every year not a single lump sum at the end. If I lend you 10$ and you agree to pay me an inflation adjusted 1$/year for 100 years that’s vastly better than getting an inflation adjusted 100$ in 100 years. In the initial example the first dollar is discounted X%, the second X%^2, the third X%^3… Where getting paid an inflation adjusted 100$ after 100 years is fully discounted X%^100. The first case is equivalent to a bond paying nearly 10% + inflation with annual payments where the second is closer to 4.7% + inflation without annual payouts. PS: Further it’s ~zero risk as the contract states the city is responsible if revenues fall below projections.
- pc86 3y agoIt's local news, I'm absolutely positive it's just raw numbers. $1.16 billion paid and ~$11.6 billion in total estimated revenue over 75 years. No reporter is doing discounted future cash flow calculations even if they know how to (they don't).