When analysing investment projects someone has to deal with the golden question “is it going to be profitable?”, followed by, “when?”. There are so many ways of answering these questions, but at the moment I’m going to focus on 3, very briefly:
1) Net Present Value (NPV).-
Get all the cash flows the project is going to generate (money invested, money spent, money earned), choose a reference interest rate (i.e. weighted average cost of capital, risk-free interest rate…), discount’em to present, and add’em up. If this value is positive then the project is worthwhile.
2) Internal Rate of Return (IRR).-
It is the interest rate that makes the NPV equal zero (IRR | NPV=0). If this rate is above your reference interest rate, then the project will have a positive NPV. Both measures are complementary, and both accept at the same time the project, rejecting the project at the same time, as well.
3) Pay-back Period.-
It is the time that takes the project to pay itself, so we’re talking from a cash-flow perspective exclusively. So, for instance, if the value is 2.25 years, that means the project will start generating profit after 2 years and a quarter.
When calculating this period I like to first discount all the cash-flows using the reference interest rate, so $1 is $1 for every flow (you know the first principle in finance: how much?-when?).
For easing the calculations I’ve prepared a spreadsheet to help. You can download it from the link below.
ROI Simulator v.1.10
The Netflix Prize is in the company’s own words the”quest” for “substantially improve(ing) the accuracy of predictions about how much someone is going to love a movie based on their movie preferences”.
I read about the prize last february on Michael Trick’s blog and the first thing I saw was the $1 Million for the winner. However, although we’re on it for the money (YES!) we don’t thing we gonna get it. So, let’s mess about it!:
_For all of you that are, like me, amateur OR-ers, I’m starting a series of posts showing where the heck I am.
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1) The data: the training set (data you have to use to create the model) is made up of more than 17 thousand text files. So, although some experts are advising on Netflix’s forums not to group them, I’ll do.
Following my own weaknesses and economist-like-mind I’m going to group the data in a single file, in order to dump it into a database (PostgreSQL, probably). Even more, as I don’t have time to learn any other language, I’ll be using VBA for Excel.
Here we go…
Sub AgrupaDatos()
Dim N As Double
Dim TextoArchivo As String
Open “C:\training_set.txt” For Output As #1
For N = 1 To 17770
Open “C:\training_set\mv_00″ & Format(N, “00000″) & “.txt” For Input As #2
Do While Not EOF(2)
Line Input #2, TextoArchivo
Print #1, TextoArchivo
Loop
Close #2
Next N
Close #1
End Sub
The module above takes about 30 minutes (Pentium 1.73 Ghz, 1GB RAM) to process the data into a file with a size of 1,92GB.
Next, the database.
http://www.google.com/intl/en/contact/newsletter.html
Last news: Google’s looking for engineers willing to work in the new Moon R&D Center!!!. A Campaign even better than that one of the “e” number (back in 2004).
Cheers Google!
Step by step and thanks to the Debian team installing a powerful open-source CRM is easier than ever.
For those of you that remember my previous “geek” series posts, forget them!. Now it is even easier to install the Debian OS, to install the database, to install the webserver, the Servlet server, and most important, the Java JDK.
Why is this boring?. Well, considering I’m not a geek I find it entertaining, because it’s easy, because I can focus on the core, the business model, not the technicalities!. If you’re a geek though, you’ll find it anathema, boring, obtuse…
I carry on later my dear colleagues!
Hi pals,
I’m in the process of writing an essay on the efficiency of the procurement function within the enterprises and I’m finding some interesting facts.
You’ll agree with me if I say that most of the current literature balances around TCO (total cost of ownership), but this is not what is godsmacking me. Surprisingly (or not!), is the e-industry which is monopolising TCOs here and there. Good job Mr Big Blue!.
Just as a matter of interest, I’ll use “total cost of procurement”. Yes!, TCP, as in TCP/IP, we’re in a draw!.
