Join Rudolph Rosenberg for an in-depth discussion in this video Example three: Repay debt, part of Making Investment Decisions.
…Our last example is in the field of personal finances.…There is one thing that most people don't realize, which is that they…have one of the best investment opportunities…on their front door waiting for them.…That great investment opportunity is simply to repay their own debt.…One might wonder how repaying debt is any investment at all.…It actually is.…And to see how it is one, you need to think of…it as spending money to repay the loan, to save you all the future payments.…
In other terms, for the remaining of the time of the…loan, you will not have to pay an amount every month.…Which in turn will be available to you to spend or to invest.…The removal of a negative cash flow then becomes for you a positive cash flow.…Let's take the example of a $12,000 credit card loan…contracted at the rate of 11% interest per year,…and to be repaid over the course of four years.…The loan repayment schedule is the following.…
As you can see, you will be dispersing $3,722 every…year and in total pay up to $14,887,…which represents interest of $2,887…
This course teaches the net present value (NPV) methodology, an investment evaluation formula used by countless publicly traded companies and financial analysts, in a way that makes it accessible and applicable to you—no finance background required. Rudolph Rosenberg explains what investments are, how they are measured, and what makes a good investment. Then he explores the NPV formula in depth, showing you how to evaluate your cash flows, choose a rate of return, and assess the risk of a particular investment. This all culminates in a look at how the principles of investment apply to three real-life scenarios that any individual or company might encounter.
- What is an investment?
- Understanding ROI
- What makes a good investment?
- Using the NPV formula
- Assessing risk
- Applying NPV to real-life situations