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Originally Posted by TwistedChief
First, interest rates are projected to go from the lows 5s to the mid 3s over the next 6yrs so assuming constant rates is flawed.
Second, but if you want to assume simplicity at current 5.25 spot rates, it takes you more like 13-14 years to double your money (rule of 72). For you to be right in terms of doubling your money over 6yrs, one would need to be receiving around 12% and there’s nothing remotely riskless that involves that return.
Third, that $430k is pre-tax. I think his effective federal tax rate (I’ll assume Florida so no state and local) would be about 31% which means he actually takes home a bit less than 300k of it. Meanwhile of course he’s paying out pre-tax income through the life of the deal.
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Who said anything about 'riskless'?
I've already stated that this presents about a 14% ROI over the rookie deal. And while that's high, it's not unheard of and certainly not 'unconscionable'. The rest of it would be completely speculative.
And yes, the $430K is pre-tax - and? It came from BLA coffers that are post-tax in their own right. BLA's already paid the taxes on that money - why should they be taking on the burden of taxes again?
Again, I'm looking at this from BLA's chair because THAT'S the analysis that should be done. That's how you calculate their Rate of Return; not on how much of the money Dexter actually got. How much they SPENT is what's critical and they SPENT that $430K on Dexter instead of putting it into other investment vehicles.