Wednesday, October 27, 2010

T-Mobile's New G2 and Why You Should Know Math / Finance

I was looking for my wife a new cell phone, and ran across a math / finance problem.  Look at this screen shot:

For a math professor, like Dan Myer, it has all the information that is needed.  It poses questions, many of them:
  • Which plan is cheapest?
  • When does the 500 minutes plan become more expensive than the 1000 minutes plan?
  • Should I purchase the phone for $499 or $199 given the change to the plan values?
  • Is there another carrier who is cheaper?
  • . . .
The question I am going to deal with is, "Should I purchase the phone for $499 or $199 given the change in the in the plan values?"  For this experiment, I am going to use the Unlimited Minutes to test.

$499 + 79.99 * 24 is less than $199 + 99.99 * 24.  Therefore, I should purchase the phone outright on a math basis.

Given you could invest the difference at 2%, the differing NPV's are about $170 difference.  You're cost of capital for the contract is about 9% between the two plans.  The cost of capital is a differential IRR equation.  $-300 now, but $20 more per month over the next 24 months, which equates to 9%.

This figuring doesn't include the taxes and fees, which would presumably be higher on the $99.99 / month plan than the $79.99 / month plan.  Giving even more lee-way to purchasing the phone in the beginning.

Monday, October 25, 2010

Why Top Students Don't Want to Teach

Harvard Business Review recently sent out their "The Daily Stat" with the headline "Why Top Students Don't Want to Teach."  Of, course . . . I was hooked.  What amazes me is the difference between the questions "I would be proud to tell people I had this job" and "People in this job are considered successful": 60% versus 38%.  To me, they are the same questions.  "I would be proud to tell people I had this job" has a "correct" answer.  The correct answer is "yes."  "People in this job are considered successful" externalizes the question, and you get more honesty.

The teaching profession has a large public opinion gap to overcome.  When I was a teacher, I was told multiple times "I can't believe you are a teacher."  Have fun with the results: