5 ms·
Technically you're correct, the best kind of correct. But well, is there a pretty easily understood, common sense way to compare an yearly budget of $10B with
by jerrya 13y ago
Technically you're correct, the best kind of correct.
But well, is there a pretty easily understood, common sense way to compare an yearly budget of $10B with a total cost of $6B, especially in terms of a trade off?
- bjterry 13y agoIt just so happens there is! (Sort of.) A one time sum can be compared with recurring annual sums by calculating the present value of each, taking into account prevailing interest rates. The present value of an infinite series of annual payments is given by the perpetuity formula: PV = (annual payment) / (interest rate). Assuming that the NSA budget won't grow, and using the 30-year treasury bond rate of 3.71%, the present value (or cost, really) of having an NSA forever is $270B. Of course, the NSA's budget is probably growing faster than 3.71% right now which ruins the math, since it would imply an infinite NPV. Also, to be totally accurate you would have to calculate the present value of the hyperloop which would be spent over some number of years.
- jerrya 13y agoWhat might you do with your infinite series to roughly estimate the NPV in your head without having to write anything down? Especially when faced with certain tradeoffs, like comparing a $6B hyperloop with an agency with an annual budget of $10B?
- T-hawk 13y agoJust divide the yearly cost by the rate of interest or inflation. $10 billion divided by 3.71% yields that $270 billion figure. Use whatever mental shortcuts work for arithmetic in other contexts. There's no need for an actual infinite series. Explaining it the other way around, if you had $270 billion now, you could fund the NSA by $10 billion per year in perpetuity based on the interest. That's a simple calculation of $270B x 3.71%.
- jerrya 13y agoMust just be me. How about: I'll trade 7 1/2 months of the NSA annual budget for one hyperloop.