3 ms·
The present value of $7 in 35 years is $1.45, assuming a risk free rate of 4.5%. Paying $2940 over 35 years is much more affordable than paying $2940 up front.
by maxbond 1y ago
The present value of $7 in 35 years is $1.45, assuming a risk free rate of 4.5%. Paying $2940 over 35 years is much more affordable than paying $2940 up front. If the goal is to be rational about risk, let's right-size the numbers. Otherwise our figures will be misleading.
- kevin_thibedeau 1y agoYou're not going to spend a fixed price over time. You're going to consume a fixed amount of energy and pay an increasing rate as the dollar inflates.
- maxbond 1y agoIdeally we'd model all relevant parameters, my main point is that presenting the cost as $2940 is misleading.
- yunwal 1y agoAnd their point was that it’s not. The price of electricity typically grows to offset inflation.
- maxbond 1y agoThe time value of money is typically a more significant factor than inflation. If you believe that there will be massive inflation that outstrips the time value of money, then you should still feel this figure is misleading because it's too low.
- zamadatix 1y agoI agree it's best to consider the capex/opex separately but I strongly disagree taking this approach will right-size the number. Here you're taking lifetime opex in nominal dollars but still devaluing it based on inflation anyways, which will not give you a meaningful result.
- deleted 1y ago[deleted]