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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