Want a guaranteed rate of return of almost 35% over the next five years? All you have to do is buy your own modem. Huh?
I got this idea when I was reviewing my Comcast bill almost a year ago and a $3 charge every month really started to annoy me.
Was This a Good Decision?
Thinking back to my finance days in college, I thought it would be interesting to calculate the Internal Rate of Return on this $79.99 investment.
Generally an IRR calculation is used to measure profitability of an investment for a business. For example, if Widget Maker Inc. invested $10,000 in a new machine that would generate $3,000 in cash flow each year over the next five years, calculating the IRR can tell you how profitable that investment is.
The same concept, can also be applied to my purchase of a modem. I had an initial investment of $79.99. Over the next 5 years*, I save $36 each year.
If i insert those numbers into my financial calculator, I get a return of 34.95%. Not a bad investment.
*I choose only five years because hopefully we’re completely wireless by then.