Does anyone recall the question from Schweser 2011 morning where the guy makes a bunch of money from selling his private tech company, he wants to be a lawyer and we need to calculate the required return? I mean it states he needs like 200k to open his law office in 3-4 years, and something around 40k/yr for law school. Don’t we remove that from the asset base? And isn’t adding inflation to both the school costs and to the final return double counting? man this stuff is crazy.
Yea I do, did not understand this one also. What I did was to use a time value of money calculation where the FV is his investable assets + the 200k, payments were his spending requirements and PV was his current investable assets w/o the 200k. Not sure why my method is wrong either.
What does the question specifically ask ? return requirement “next year” or for another period?
I think that question said that he “wanted” to start a law practice, I believe. It was a desired outlay, sort of like a vacation home, so we don’t take it out.
Hmmm interesting… you don’t outlay vacation homes either?