Calculating Present Value

Note to myself. Of no public interest whatsoever.

An exciting topic that is virtually knocking me off my feet.

Present value of a future payment is the amount that one must have today to yield that payment at the future date, given the opportunity rate.

One way to calculate this is to use present value tables.

How much is the present value of receiving 4 million US$ in 6 years at an interest rate of 10% paid at the end of the 6 years?

The present value is calculate (amount received at end of period) * (opportunity rate for 10% and 6 years)-
Equals 4 million * 0.564 = 2.265 million US$

If it’s an annuity, i.e. a series of receipts or payments of the same size are received/made at regular intervals, then use present value table for annuities.

For example regular payments of rent 1.4 million US$ at the end of each year for 6 year at an interest rate of 10% have a present value of 1.4 million * 4.355 = 6.097 million $$$.

Alternatively you can use the Excel/OpenOffice function PV:

Syntax:
PV(rate; numperiods; payment; futurevalue; type)

Where are the business models for content?

News of dying newspapers and print magazines have been making the rounds. But also some well-established and respected blogs are closing, or struggling.

Mlle A. of Handmade2.0 recently commented on a design blog’s call for donations:

It’s not just print mags that face hardship. Meaning, blogs that started out with an unpaid version and that are now shooting stars among the design-spotting blogs have a serious problem: keeping up the level and quality, expanding the team AND being able to pay their editors, while at the same time people expect blogs to be completely free of charges. It’ll be interesting to see how this develops.

It’s not just online vs. print. It’s about new business models for content.

More than ever we need good and independent journalists, who have time to research and follow up on stories.

I noticed that some digital photography blogs have been bought by large online shops, e.g. Amazon bought dpreview.com in 2007 and another digital photography blog war recently acquired by a big player. Can’t think of the name. It was mentioned on a TWIP podcast and I remember thinking that it is a great example how content can help drive traffic to a site. Before buying a DSLR I spent a disproportionate amount time on photography equipment blogs.

But what about the less gadget-orientated news? The Watergate kind of journalism. News about local politics in your home town. How will that evolve?

Lots of questions, while I dive into the next chapter of “Principles of Business Economics”.

Pirates and Poverty

Like in a Hollywood movie, a U.S. captain was freed from Somali pirates. I’ve been browsing the web, reading articles.

Some observations:

For one, I’m wondering how the navy seals managed to target the pirates. I thought the life boat was an enclosed boat, similar to the one shown here.

Secondly, it seems that the person to call if your ship has been kidnapped is Andrew Mwangura.

The German TV station, ARD lists a quote by him linking piracy and poverty:

Piraten wie die, die bei Phillips Befreiung ums Leben kamen, seien zudem die FuàŸsoldaten im Millionengeschäft mit der Piraterie. Vor allem Jugendliche, die nach 18 Jahren Bürgerkrieg in Somalia jede Perspektive verloren hätten. Auch deshalb ist Mwangura überzeugt, dass die Piraterie vor Somalias Küste weitergehen wird. “Jemanden, der hungrig ist, kannst Du nicht aufhalten. Ein hungriger Mann ist ein wütender Mann. Er wird tun was immer er kann, um ein bisschen Geld zu verdienen, und er wird Risiken eingehen, denn er hat nichts zu verlieren,” ist Mwangura überzeugt.

Sounds like a plausible explanation.

In a BBC article Mwangura explains:

Andrew Mwangura, who runs the Kenyan Seafarers’ Association in Mombasa, thinks that piracy has become a way of life for many young Somali men, as they simply do not know any better.

“All my life, I don’t know what life is, so if someone gives me a gun and tells me to go and make a living, they go and do that,” he said.

Many young men have no education and no understanding of the rule of law.

Somalia has no navy, so many militia groups have taken it on themselves to deal with the problem of illegal fishing.

“Illegal fishing costs Somalia $6m annually and around 800 vessels from around the world are involved,” says Mr Mwangura.

Pirate fisherman provide cheap fish for home markets, Somali pirates support their towns and villages. That raises a key question: is helping your own people good or bad?

Sounds noble. Like Robin Hood.

I think blaming poverty is a way of over-simplifying the situation. As Mwangura states the true beneficiaries of the ransoms are to be found elsewhere, probably in some air-conditioned building, lining their already well-stocked pockets. The pirates are just the foot soldiers. And they don’t know anything different.

Thirdly, the Somali pirates show how vulnerable the shipping business is. And how much our economic systems build on mutual trust.

And finally, this news item reminds me of Proverbs 30:

give me neither poverty nor riches,
but give me only my daily bread.

Otherwise, I may have too much and disown you
and say, ‘Who is the LORD ‘
Or I may become poor and steal,
and so dishonor the name of my God.

This text sprung to mind. I heard it first in a remote village somewhere in Malawi many years ago.

Better Connectivity for Africa

Under Sea Cable Arrives in Africa - Appfrica

I really wish this would become reality:

“For me it is so good,” says Sondoto Kobia of Kenya. “I went to sleep yesterday barely being able to get out my emails, but this morning I uploaded a two-hour video of my sons graduation to You Tube in only 10 minutes! I’ve also heard from a number of family members who moved all over the world to places like Spain, France and Washington D.C. The phone is ringing, that’s probably one of them now!”

If only this were real…