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Message: [QUOTE="Millhouse, post: 938530, member: 78"] the reason the outcome is ridiculous is because it's ridiculous to spend 500 million when you spend 500 million on a project and never have a penny of cash left over from operations, that must mean that all the benefits are social. These (discounted) benefits still need to add up to 53 million a year (at a 10% discount). I think that's a big number. Cuomo, you, genghis khan don't. Let's try this way The project still costs 500M I'll give you a discount rate of 3% even though that's wrong. That means there must be 25 million of value a year for this thing to be worth it. That value could be in cash or it could be some intangible fuzzy happy feeling. Lets also assume that every dollar of revenue that comes in has some magic multiplier that makes everyone better off. Call it 0.5 Even though there's substitution in effect for the locals, so many people travel in that every 2 dollar spent at the dome results in another extra dollar of wealth or happiness or value or whatever outside the dome. The private investor needs some return. We'll give them the same 3% discount. It costs money to run the dome, we need to pick a margin. Private investor paying 100M, 3% discount, 20% margins = 5 million cash to break even and 25 million in revenue. In comes the multiplier of .5. I think this is fair because of substitution. Football and basketball are going to be significant and those people are going to be from the area largely. If we're going to rely on conventions, the risk goes up and the discount rate should. So even with what I think is a ludicrous assumption of a 3% discount (I think it's higher than that) and a multiplier of .5, that only gets you to a total value of 17.5 Million (5 million profit for the investor plus 12.5 intangible benefits for the community. 17.5 is less than 25. Bad investment. You're going to have to back into a bigger multiplier to break even. 0.8 to be exact This is using a discount rate that is too low, a significantly positive multiplier, and a generous margin on just the private component. [/QUOTE]

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