STEP 5—“DO THE NUMBERS”
If you have done a good job on steps 1–4, the final step in determining Present Value will usually be surprisingly easy.
Most of us are familiar with the old joke about the two guys out camping who see a hungry bear heading for their campsite. As one guy begins to put on his running shoes the other one asks him why he is bothering to do so. After all there is no way he is going to outrun the bear, even wearing running shoes. The second guy replies, “I don’t have to outrun the bear, I just have to outrun you.” Well, using Present Value is a lot like running from the bear. Most of the time we are not trying to determine what the exact Present Value of a particular future path is but rather whether the Present Value ...