Quote from: Impaler on April 24, 2013, 12:49:50 AM

Quote from: myrkul on April 23, 2013, 10:52:37 PM

Quote from: Impaler on April 23, 2013, 10:27:48 PM

In the tree example it's not the tree that's collecting interest, its the 7 dollars today that I could simply put in a bank at 5% and which would become $1000 dollars in 100 years without having to DO any tree planting at all. This is really very basic NPV math, if you still don't understand then go educate yourself on this concept because it has a huge bearing on what activities the monetary system is encouraging and discouraging.

Ah, thank you, I was confused as to how you got from $900 profit to $93 loss. In that case though, why not just plant $93 worth of trees, and invest the $7 at 5%, and have $1930 at the end of 100 years, plus a plot of land that you can continue to plant trees on?

Assuming, of course, that you can find an investment that will pay out 5% for 100 years.

Each dollar put into tree planting returns less then a dollar put in a bank so your most profitable choice is to but the whole $100 in a bank and have $13,150 dollars in 100 years. Also consider the scenario ware the tree planter wants to borrow the initial $100, they would then owe
$13,150 in 100 years and only have $1000 in revenue to pay it back with making their whole business a massive loss.

Assuming, of course, that they had not paid it off long before.

And your example is intentionally distorted. If I said "I plant $100 worth of trees, and in 100 years I get $100,000 from the sale of the trees, at 5% interest, putting that money in a bank would lose me $86,850." My example would be no less valid, but the answer to which project would be more profitable is reversed.