In the world of finance there are many ways to calculate if a deal is worth the investment or not. One I like for its mathematical simplicity is the Internal Rate of Return and Net Present Value calculations. I won’t get into the full mechanics of them here today, but suffice to say that if you run the ‘numbers’ from a deal on offer and compare that deal with market rate, you can decide if something is profitable or not.
A quick example where this is used: Would you loan me $90 today if I promise to pay you exactly $100 in 2 years from today?
Varying degrees of financial sophistication kick in here, and there are a lot of moving parts from a ‘deal’ perspective. But regardless of that there is a reasonably accurate number from a financial perspective that can be figured out. The question asked mathematically is what is the future value of $90 in 2 years? It ties into compound interest, risk of investment, and risk free rate of return.
Recently, in The Forum a quick deal was announced for gift cards. And rather than just leave it as a ‘hey thanks!’ I wanted to use it as a learning experience. That is going to be a running theme in The Forum. I want us all to share more and think more.
The breakdown of this deal is created in a private area of the site, it isn’t super exclusive but it at least takes it away from the eyes of google indexing. The sub forum is called: Anatomy of a Deal – The Bows and Arrows thread. Here we will focus mainly on dead deals… deals that were killed by bows and arrows quite frequently 🙂
I kicked things off with a live deal because it isn’t earth shattering. The scale of this is at max about $200 total – and when people earn double that in a single transaction buying pharmaceuticals I think we should be safe to discuss it. The value instead is taking a header like $50 off gift cards and really understanding the rate of return of your investment over time.
Also, once we really dissect the range of deals out there finding the next one will be so much easier, and opportunities will abound. If you want to read my breakdown of this deal, and others that are coming soon please signup for the forum and write a quick intro, if you include that you want Level 2 access there I will upgrade you.
As a reminder – this deal isn’t huge, so don’t race over there ready to lap it up and be disappointed when it isn’t worth a huge amount. In fact don’t rush over at all if all you want to do is lap it up. We are looking to build a community of thinkers and stewards, and hope you will join us as a contributor to that.