Ryan,
Considering other unaccounted for factors could yield an even better return ... time spent on fantasy football may in fact reduce your psychological need and time available for other risk-taking ventures.
A look at possible numbers under one such scenario:
Rather than playing fantasy football, you decide, as the masses did, that you just have to buy a second home for investment. Having more time to socialize, you of course do it when peer pressure is greatest, at the peak of the housing bubble about a year ago. Accordingly, you invested $80,000 on an $800,000 home. Being optimistic, let's say your negative cash flow on renting the home was only $500/month ... after just 10 months, your $5,000 in fantasy football losses would have already been accounted for - you're at breakeven! ... not to mention psychic income - what is the value of playing fantasy football versus dealing with lawyers, plumbers and real estate agents? Hard to put a value on that.
And now for the kicker ... in another year the value of the house will be about $150k less that you paid for it, plus another negative $5k in cash flow.
CONCLUSION: Fantasy football has netted you a profit of $155,000, on just a $5,650 capital investment in 2 years. With numbers this big, you don't even need to pull out the financial calculator. Just call it a huge return and keep on investing.
[ August 23, 2006, 03:33 AM: Message edited by: KJ Duke ]
Advance Questions For_Financial_Planner
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GOD Loves You
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Advance Questions For_Financial_Planner
Originally posted by KJ Duke:
Accordingly, you invested $80,000 on an $800,000 home. Can definitely tell you're living in CA!
Accordingly, you invested $80,000 on an $800,000 home. Can definitely tell you're living in CA!
FAITH IS NOT BELIEVING THAT GOD CAN....
IT IS KNOWING THAT HE WILL
IT IS KNOWING THAT HE WILL
Advance Questions For_Financial_Planner
LOL, good point KJ Duke, I guess I will just plan on winning the whole thing this year.
Ryan
Originally posted by KJ Duke:
Ryan,
Considering other unaccounted for factors could yield an even better return ... time spent on fantasy football may in fact reduce your psychological need and time available for other risk-taking ventures.
A look at possible numbers under one such scenario:
Rather than playing fantasy football, you decide, as the masses did, that you just have to buy a second home for investment. Having more time to socialize, you of course do it when peer pressure is greatest, at the peak of the housing bubble about a year ago. Accordingly, you invested $80,000 on an $800,000 home. Being optimistic, let's say your negative cash flow on renting the home was only $500/month ... after just 10 months, your $5,000 in fantasy football losses would have already been accounted for - you're at breakeven! ... not to mention psychic income - what is the value of playing fantasy football versus dealing with lawyers, plumbers and real estate agents? Hard to put a value on that.
And now for the kicker ... in another year the value of the house will be about $150k less that you paid for it, plus another negative $5k in cash flow.
CONCLUSION: Fantasy football has netted you a profit of $155,000, on just a $5,650 capital investment in 2 years. With numbers this big, you don't even need to pull out the financial calculator. Just call it a huge return and keep on investing.
Ryan
Originally posted by KJ Duke:
Ryan,
Considering other unaccounted for factors could yield an even better return ... time spent on fantasy football may in fact reduce your psychological need and time available for other risk-taking ventures.
A look at possible numbers under one such scenario:
Rather than playing fantasy football, you decide, as the masses did, that you just have to buy a second home for investment. Having more time to socialize, you of course do it when peer pressure is greatest, at the peak of the housing bubble about a year ago. Accordingly, you invested $80,000 on an $800,000 home. Being optimistic, let's say your negative cash flow on renting the home was only $500/month ... after just 10 months, your $5,000 in fantasy football losses would have already been accounted for - you're at breakeven! ... not to mention psychic income - what is the value of playing fantasy football versus dealing with lawyers, plumbers and real estate agents? Hard to put a value on that.
And now for the kicker ... in another year the value of the house will be about $150k less that you paid for it, plus another negative $5k in cash flow.
CONCLUSION: Fantasy football has netted you a profit of $155,000, on just a $5,650 capital investment in 2 years. With numbers this big, you don't even need to pull out the financial calculator. Just call it a huge return and keep on investing.
Advance Questions For_Financial_Planner
Hey Riff,
You are exactly right. I used IRR because it was sufficient and easy to calculate such a basic annual ROI and because there were both negative and positive cash flows; IRR and MIRR can determine alot. I wonder if Greg would reduce my entry fee by $829 so I could at least achieve my hurdle rate. I think I would feel much better. Anyway, I love these type of discussions.
Ryan
Originally posted by RiFF:
[QUOTE]Originally posted by ryanash11:
[QB] Riff,
The positive $600 is my winnings from placing 2nd in a mid season satellite league last year. You are right, I should broaden my horizons and have more confidence in myself, but I have low self esteem. However, if I do happen to win the whole thing my ROI will jump to 272% and increase my NPV to $74,302. That sounds much better! As far as discounting the return when it is negative, I am not exactly sure what you meant by that. I simply used my cost of capital or required rate of return(10%) to determine NPV, not ROI.
It really depends on what you are calculating. If you want IRR and NPV, you are correct.(I assume, I didn't run the numbers; but they look about right) But what the $829. represents is the NPV of those cash flows assuming a 10% discount rate. Which in essence says if you reduce your initial investment by $829. you will achieve your 10% hurdle rate.
Which is different than saying how much cash am I out of pocket at the end of year 3 if I wanted a 10% return on the cash I invested in FF.
But again, all problems are solved by winning the $100K; just ask GG. LOL
You are exactly right. I used IRR because it was sufficient and easy to calculate such a basic annual ROI and because there were both negative and positive cash flows; IRR and MIRR can determine alot. I wonder if Greg would reduce my entry fee by $829 so I could at least achieve my hurdle rate. I think I would feel much better. Anyway, I love these type of discussions.
Ryan
Originally posted by RiFF:
[QUOTE]Originally posted by ryanash11:
[QB] Riff,
The positive $600 is my winnings from placing 2nd in a mid season satellite league last year. You are right, I should broaden my horizons and have more confidence in myself, but I have low self esteem. However, if I do happen to win the whole thing my ROI will jump to 272% and increase my NPV to $74,302. That sounds much better! As far as discounting the return when it is negative, I am not exactly sure what you meant by that. I simply used my cost of capital or required rate of return(10%) to determine NPV, not ROI.
It really depends on what you are calculating. If you want IRR and NPV, you are correct.(I assume, I didn't run the numbers; but they look about right) But what the $829. represents is the NPV of those cash flows assuming a 10% discount rate. Which in essence says if you reduce your initial investment by $829. you will achieve your 10% hurdle rate.
Which is different than saying how much cash am I out of pocket at the end of year 3 if I wanted a 10% return on the cash I invested in FF.
But again, all problems are solved by winning the $100K; just ask GG. LOL