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Phuket Business: Time is money

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PHUKET: One of the first concepts we needed to learn when studying finance was that of the time value of money.

In theoretical terms it is quite easy to understand, but when practically applying it to life decisions it can be a little more complicated.

Basically the idea is that 100 dollars today is preferable to 100 dollars in a year or 10 years. The first and obvious reason is that something may happen in the time before your payment comes that could affect the ability of the other party to make good – a bankruptcy for example.

The second and more important aspect of time is that the dollar today can be invested and would be worth more next year. Thus, you always need to compare cash flows in the same time frame when making a financial decision or you are not comparing “apples and apples”.

The trick is to know what rate of return to use for the “discount” either to the present value or to a future value. For example, if you could get five per cent simply by putting the money relatively risk free into a bank account, then your 100 dollars today would be worth 105 dollars in one year. 100 dollars paid to you next year would in fact only be worth 95.24 (rounded to the nearest penny) in “today’s dollars”.

Obviously when trying to value a whole string of future cash flows, both going in or out, the math can get a bit complicated. Without needing any fancy formulas though, you can simply plug each year’s cash flow into an excel spreadsheet and convert to a common time, then add them up.

It could be a business such as a coffee shop or guesthouse, or a financial investment such as a bond which pays annual coupon payments, but you should always try to make sure you account for the time value of money when considering investments.

Keep in mind that someone trying to sell you their business may not be 100 per cent accurate in giving you their cash flows, so I would always look at a variety of scenarios, such as 25 per cent or 50 per cent of what they tell you, and see if it still makes financial sense.

You don’t need to be a math whiz to convert cash flows into one time frame, however if you have trouble with these sorts of things, you can always get an accountant to do a net present value for you and if they are any good this should be simple and cheap.

The results are often surprising, such as when considering the net present value of a string of payments in a defined benefits pensions scheme. The absolute value of payments going out 30 years or more may seem like a large amount, but when converted back into today’s terms it often isn’t worth very much at all.

I have done a lot of these recently when looking into pension transfers, and even after doing these calculations until I was bored to tears during my days at business school, I still have to go back and check for mistakes, and sometimes I am surprised at how small a net present value ends up being in certain scenarios.

David Mayes MBA lives in Phuket and provides wealth management services to expatriates around the globe, specializing in UK pension transfers. He can be contacted at david.m@faramond.com.

— David Mayes

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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Domestic air passenger numbers double those of January

Maya Taylor

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Domestic air passenger numbers double those of January | The Thaiger
PHOTO: Vietjet

Passenger numbers on domestic flights within Thailand have doubled within a month, rising from 4,000 in January to over 10,000 this month. Having nearly recovered to pre-pandemic levels, domestic travel plummeted once more when Covid-19 resurfaced late last year.

Apirat Chaiwongnoi from the Department of Airports says 15 of Thailand’s 29 airports are now operating domestic flights, with more expected to follow. He believes the aviation sector will continue to recover further in the coming 6 months, bolstered by the national vaccine rollout.

Around 120 domestic flights a day are now operating, which is twice the number that were operating at the lowest point in the crisis. Prior to the resurgence of the virus in December, domestic passenger numbers had recovered to 30,000 – 40,000 a day, around 80% of pre-pandemic numbers.

The DoA says airports must continue to adhere to the Covid-19 hygiene measures put in place by the Health Ministry and the Civil Aviation Authority of Thailand.

SOURCE: Bangkok Post

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