Originally Posted by
ERJFO
It's not really an 11% ROI. You need to account for opportunity cost and inflation. Even if the opportunity cost is zero it's more line 8%-9% ROI. Also not mentioned is the risk of the deal. Don't get me wrong, I think it was a good deal for SKYW but it's not an 11% ROI.
I understand where you’re coming from but it's still an 11% ROI on the first $80M and 8% on the last $49M. Do you think the money earns that kind of ROI when it’s just sitting in the bank? More than likely it’s not even gaining a rate even close to inflation. Plus when was the last time you purchased a car or took out a loan (not a mortgage) and the bank wanted to adjust your rate every year based upon inflation, risk, value of the dollar and /or taxes? Ok, sounds like a Credit Card loan….LOL! Now if you want to talk about the total ending value of the agreement, that’s a different story because you have to factor in all of the below.
Speaking of Opportunity Cost………………40 jets secured for an average of 8.4 years, 14 a/c placed into service, an 11% ROI on $80M, 8% on $49M and last rights all secured by equipment and airport slots verses a small bank interest rate? Sounds way to damn good to be true.