Monday, May 9, 2011
Zero Sum Game
a zero-sum game is a mathematical representation of a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Cutting a cake is zero-sum game, because taking a larger piece reduces the amount of cake available for others. In contrast, non-zero-sum describes a situation in which the interacting parties' aggregate gains and losses is either less than or more than zero. A zero-sum game is also called a strictly competitive game. Zero–sum games are most often solved with the minimax theorem which is closely related to linear programming duality.
Sunday, May 8, 2011
Wednesday, May 4, 2011
Valuing Domain Names
Using a Capital Budgeting Techniques to Value Domain Names
Intelligent real estate investors make strategic long-term decisions and capital budget advertising as part of the real estate investment process.
Capital budgeting is similar to security evaluation where future cash flows are estimated risks and are appraised and reflected in a cost of capital discount rate,
all cash flows are put into a present value basis, and if a projects NPV is positive, it is accepted.
Cancunvillas.com gets 4500 visitors a year. If we had to pay for advertising in search engines we would have to pay between 50 cents to $1.50 a click.
So roughly cancunvillas.com generates $4500 in advertising for it's owners every year. This is basically a risk free investment.
We use NPV (net present value) to value and compare investments.
Current yield on a 1 year t-bill is .27%.
$1,000,000 t-bill would pay $2700 after one year.
To earn $4500 at the risk-free rate you would need invest 1,666,666.67= $4500 = 1/.0027
Many consider the US Long bond as a better predictor of long term inflation and the risk premium.
Interest rate of 4.6%:
$4500.00 • 1/.046 = $97,826.09
Some may think there is more risk involved and demand a higher hurdle rate like 12%:
$4500 • 1/.12 = $37,500
We believe it is worth more because the email lists generate high net worth leads as well.
Intelligent real estate investors make strategic long-term decisions and capital budget advertising as part of the real estate investment process.
Capital budgeting is similar to security evaluation where future cash flows are estimated risks and are appraised and reflected in a cost of capital discount rate,
all cash flows are put into a present value basis, and if a projects NPV is positive, it is accepted.
Cancunvillas.com gets 4500 visitors a year. If we had to pay for advertising in search engines we would have to pay between 50 cents to $1.50 a click.
So roughly cancunvillas.com generates $4500 in advertising for it's owners every year. This is basically a risk free investment.
We use NPV (net present value) to value and compare investments.
Current yield on a 1 year t-bill is .27%.
$1,000,000 t-bill would pay $2700 after one year.
To earn $4500 at the risk-free rate you would need invest 1,666,666.67= $4500 = 1/.0027
Many consider the US Long bond as a better predictor of long term inflation and the risk premium.
Interest rate of 4.6%:
$4500.00 • 1/.046 = $97,826.09
Some may think there is more risk involved and demand a higher hurdle rate like 12%:
$4500 • 1/.12 = $37,500
We believe it is worth more because the email lists generate high net worth leads as well.
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