here's an interesting math problem
If you could choose between two streams of cash:
- $ 1,000,000 a year for the next 15 years OR
- $ 1,100,000 a year for only 14 years, and starting one year later (i.e delayed by year), ...
which would you take? (assume a 5% discount rate for the purposes of this example)
The answer is (using PV analysis) - you would be better off choosing the second alternative.
Now imagine if the second revenue stream was much higher. Say 50% higher, or 100% higher? Then it is an absolute no brainer. You would (should!) pick the second stream in a heart beat !
Of course varying the discount rate can alter the findings somewhat.
And if you're 74 years old, that might influence your decision as well.
Please discuss amoungst yourselves.
MM