I have an option to prepay my ISP bill. $419.40 for one year, versus
$39.95 per month for 12 months.

What is the best way to figure the advantage/disadvantage of prepaying?
--ron

Well, you can do a net present value of each payment, and calculate the
'return' on your $419.40.

Or I can multiply, see you are paying $419.40 instead of $479.40. Since
the average of you payment stream would be six months, it seems a 14%
return for 6 months, or nearly 28% per year. This is 'back of the
napkin', but close enough for your question. I'd do the above NPV a bit
later. ( I am covered in paint right now, and this is my break)

Joe

On Sat, 9 Aug 2008 16:29:24 -0500, joetaxpayer <joetaxpayer@nospam.com
wrote:

Well, you can do a net present value of each payment, and calculate the
'return' on your $419.40.

Or I can multiply, see you are paying $419.40 instead of $479.40. Since
the average of you payment stream would be six months, it seems a 14%
return for 6 months, or nearly 28% per year. This is 'back of the
napkin', but close enough for your question. I'd do the above NPV a bit
later. ( I am covered in paint right now, and this is my break)

Joe

Yes, I did the NPV calculation and got around 28%. I also used Excel's
XIRR function and got closer to 35%.

Your back of the napkin answer, though, is more than close enough to
convince me that it is a worthwhile "investment".

Even if it isn't worthwhile from the NPV point of view, it is from
the time point of view. That is 11 payments that you don't have
to worry about getting lost, writing checks, getting mishandled,
or whatever. I'll take that time savings and reduction in worry
any day of the week.

On Sat, 9 Aug 2008 16:29:24 -0500, joetaxpayer <joetaxpayer@nospam.com
wrote:

Well, you can do a net present value of each payment, and calculate the
'return' on your $419.40.

Or I can multiply, see you are paying $419.40 instead of $479.40. Since
the average of you payment stream would be six months, it seems a 14%
return for 6 months, or nearly 28% per year. This is 'back of the
napkin', but close enough for your question. I'd do the above NPV a bit
later. ( I am covered in paint right now, and this is my break)

Joe

Yes, I did the NPV calculation and got around 28%. I also used Excel's
XIRR function and got closer to 35%.

Your back of the napkin answer, though, is more than close enough to
convince me that it is a worthwhile "investment".

Thanks.
--ron

who is the ISP?

will they go broke before the 12 months is up?

who is the ISP? will they go broke before the 12 months is up?

nations start wars, win
wars, and lose wars, and asteroids strike the earth.

who is the ISP? will they go broke before the 12 months is up?

A very valid question. We "locked in" and prepaid
a local propane vendor (secondary heat is propane
(primary wood/coal stove)). The vendor had been in
business as long as I've been in the area (near
30 years).

Next thing we knew, bankruptcy here they come !!

It's a bit over 2 years later and we're just now
getting correspondence from the bankruptcy folks,
and it looks like we're gonna get a whopping 15
to 20 cents on the dollar for our "prepay".

Businesses, even folks that have been in business
for literally decades, can knock off at any time.
I learned all about this one the hard way. Looks
like when the dust settles and we've got our
checks from the banruptcy trustee, we'll have
lost near $1,200 ... all in an effort to save
$200 with a prepaid plan.

Ya spends yer money and ya takes yer chances.

In this case, we lost.