I decided to bump this to a new topic since I have a feeling it will elicit interesting responses (actual calculations welcomed!). Here’s what I posted: When I started L1 in 2007, our Schweser instructor (CFA, CFP) told us that the NPV of the charter was approximately $2 mil. What do you think it is now?
Shouldn’t it be the NVP of your own personal intellectual skillset? No one is guaranteed cash for passing 3 levels of a test. I hope nobody thinks they are just coasting after they (hopefully) pass this behemoth program.
That 2007 estimation may be about as accurate as house prices were in 2007 in, say, Miami, or as prices of big US bank stocks were then. Hopefully it’s more accurate though. Obviously (or at least it should be obvious) the NPV is greater the younger you are. And probably the taller you are as well.
sterling76 Wrote: ------------------------------------------------------- > I decided to bump this to a new topic since I have > a feeling it will elicit interesting responses > (actual calculations welcomed!). Here’s what I > posted: > > When I started L1 in 2007, our Schweser instructor > (CFA, CFP) told us that the NPV of the charter was > approximately $2 mil. What do you think it is now? I’ve heard of some stupid comments coming out of Schweser instructor’s mouths. One was that you had to score at least 80% on the CFAi practice exams “to even have a chance”, but this one is perhaps that most moronic I’ve come across. Of all industries, the investment industry is most sensitive to individual performance. In addition, he has no way of reasonably approximating the value of what the same caliber individual would earn given the fact that most individuals of that caliber go on to pursue the CFA. What’s his discount rate? I think that’s pretty important. Obviously in today’s environment the incredible levels of uncertainty and the widening gap between potential outcomes will result in a rather high discount rate of expectations. All said, at this moment I would approximate my charter value NPV at about $8, after taking into account costs including Direct Materials (registration & books), Indirect Materials (Starbucks, highlighters, etc.) and Direct Labor (broken out separately @ $25 / hour. Anyhow, this actually piqued my curiosity, so I’m going to work on building out a solid spreadsheet analysis of this during classes tomorrow. I’ll get back to you on it.
BTW, I’m not criticizing you Sterling, rather the instructor.
Swan, I got you… no need to clarify, I’m clear on the fact that this was not my comment! Anyhow, don’t forget to include all those life experience opportunity costs in your analysis. For example, the value of the girlfriend that left you because of neglect due to your studying who would’ve otherwise become your wife and who happens to be a Victoria Secret model and heiress to a beer distributing empire. How do you discount priceless?
what required rate of return was used in that calculation for 2MM?
This is such a Level 1 forum post. Lets not post stuff like this on the Level 3 forum.
Why not? Do we have to get our sense of humour surgically removed to be a L3 candidate?
Mandelbrot Wrote: ------------------------------------------------------- > Why not? Do we have to get our sense of humour > surgically removed to be a L3 candidate? WHY not? hmmm… for one, it makes it sound like as if we have not learned anything at all. How about instead of relating it to NPV, we talk about risk adjusted returns and relate it to that. Or better yet, quantify it with some other type of metrics. Seems kinda odd to still be talking about NPV at the level 3 forum. I belive that might be like the 4 chapter of the Corporate Finance book in 3rd year.
The fact that NPV is covered in Level I doesn’t mean it’s not a useful concept. Why would we “talk about risk adjusted returns” (not even sure what that means in this context) or “quantify it with some other type of metrics” (not sure what other metric[s] you have in mind) when the question is how much the charter is worth?
3.14159265
whystudy Wrote: ------------------------------------------------------- > Mandelbrot Wrote: > -------------------------------------------------- > ----- > > Why not? Do we have to get our sense of humour > > surgically removed to be a L3 candidate? > > > WHY not? hmmm… for one, it makes it sound like > as if we have not learned anything at all. How > about instead of relating it to NPV, we talk about > risk adjusted returns and relate it to that. Or > better yet, quantify it with some other type of > metrics. > > Seems kinda odd to still be talking about NPV at > the level 3 forum. I belive that might be like > the 4 chapter of the Corporate Finance book in 3rd > year. Well, the original statement from the instructor was regarding NPV so we’re addressing it in that format. NPV does adjust for risk using various required rates of return so I believe it is “risk adjusted.” But rather than make a mindless critique, why don’t you kick off the discussion using advanced metrics, Whystudy. What do you suggest?
Black Swan Wrote: ------------------------------------------------------- > whystudy Wrote: > -------------------------------------------------- > ----- > > Mandelbrot Wrote: > > > -------------------------------------------------- > > > ----- > > > Why not? Do we have to get our sense of > humour > > > surgically removed to be a L3 candidate? > > > > > > WHY not? hmmm… for one, it makes it sound > like > > as if we have not learned anything at all. > How > > about instead of relating it to NPV, we talk > about > > risk adjusted returns and relate it to that. > Or > > better yet, quantify it with some other type of > > metrics. > > > > Seems kinda odd to still be talking about NPV > at > > the level 3 forum. I belive that might be like > > the 4 chapter of the Corporate Finance book in > 3rd > > year. > > > Well, the original statement from the instructor > was regarding NPV so we’re addressing it in that > format. NPV does adjust for risk using various > required rates of return so I believe it is “risk > adjusted.” But rather than make a mindless > critique, why don’t you kick off the discussion > using advanced metrics, Whystudy. What do you > suggest? point taken, so if we want to BS a bit… is the 2 mil figure inflation adjusted? for other metrics, maybe we can use factor models to approximate a rate of return for holding a CFA charter for 20 years, instead of just using NPV to get a dollar value of what is worth.
whystudy, your statements don’t make sense. What do you mean by inflation adjusting NPV?
maratikus Wrote: ------------------------------------------------------- > whystudy, your statements don’t make sense. What > do you mean by inflation adjusting NPV? it means NPV adjusted by inflation. I don’t know how else to say it. = ) PV = In/(1+i)n = [Vn (1+f)n] / (1+r+f+rf)n = [Vn(1+f)n]/[(1+r)n(1+f)n] = [Vn(1+f)n]/[(1+r)n(1+f)n] = Vn/(1+r)n
whystudy Wrote: ------------------------------------------------------- > maratikus Wrote: > -------------------------------------------------- > ----- > > whystudy, your statements don’t make sense. > What > > do you mean by inflation adjusting NPV? > > it means NPV adjusted by inflation. I don’t know > how else to say it. = ) > I find it a bit ironic that you are criticizing a valuation metric that you apparently have such little understanding of.
i never critizied, just stated my opinion on this big historical day of freedom and liberation. hahahahah
Yeah dude, if you use nominal rates to discount the inflation’s already factored in.
wyantjs Wrote: ------------------------------------------------------- > whystudy Wrote: > -------------------------------------------------- > ----- > > maratikus Wrote: > > > -------------------------------------------------- > > > ----- > > > whystudy, your statements don’t make sense. > > What > > > do you mean by inflation adjusting NPV? > > > > it means NPV adjusted by inflation. I don’t > know > > how else to say it. = ) > > > > > I find it a bit ironic that you are criticizing a > valuation metric that you apparently have such > little understanding of. and by the way… i was being sarcastic when i questioned if it was inflation adjusted, as I was merely playing along with the post… so why criticize my understanding…