Still blah, blah, blah

[Valdis.Kletnieks at VT.EDU]

On Sun, 30 Mar 1997 01:25:23 CST, you said:
> 2. The yield is not 15 times. You show "$1m in"...above I show $50m in...
> 	and $15 million out, that is 30% return on the investment of $50m...

Umm.. Jim? In a previous life, did you  ever work as an accountant for
a movie studio, computing percents of the net on  movies so actors get
screwed out of money?

You   have to  keep  "your"   money  and "their"   money seperate when
computing return on investment.   If you spend $1M  to  buy and run  a
bakery,  sell    $50M  worth of   bread   at    $2/loaf, spend $35M on
flour and payroll,  and  get  $15M   in profits, you have  about 1500%
profits.

Or at least  until somebody else invests  $1M to build another bakery,
and sells $37.5M of bread at $1.50 a loaf, starting  a price war until
prices drop down to  whatever  $35.2M works out to   a loaf, at  which
point you've put in $1M of your money, taken in  $35.2M, spent $35M of
it on flour and payroll, and kept $200K, for a 20% return or so.

Now, what you originally *said* was that  since you'd be making $15M a
year, you arbitrarily set the "value" at 5X  higher (or $75M), to give
a "yield" of 20%, and then made it a more conservative $50M.  However,
the "value" is *NOT* the same thing as the actual money put in.  You
actually put in $1M.  Your customers paid you $16M.  You pocket $15M.

Your other $49M   is irrelevant.  Otherwise,   I could write  myself a
check for $1,498M, put  it in my pocket,  and offer to  do the job for
what would be essentially non-profit  0.0001% return on my investment,
since I'd only make $15M on my $1.5 billion....



-- 
				Valdis Kletnieks
				Computer Systems Engineer
				Virginia Tech


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