ELMC
DIS Veteran
- Joined
- Jul 4, 2011
There's just no way this is ever right. You cannot take something that pays off over time and just divide the cost by the years and get an accurate cost.
Sure you can. Cost is defined as the amount of dollars it takes to acquire an asset. What you are talking about is value, which is different than cost.
You may introduce time value of money and purchasing power, as I agree that those phenomena exist. But they are not cost in the true definition of the word. My position is that you are complicating matters by introducing these variables into the conversation. If the value of money and the costs of alternatives rise at a corresponding rate, there is a net zero effect vis-a-vis the future value of discounts by using DVC. If you really wanted to get technical you should predict future models that account for the projected difference between the value of a dollar and the price of the goods to be purchased and introduce that information into your calculations. But again, that's unnecessarily complicating matters.
Accounting for sunk cost has to work this way. When you buy an instantly depreciating asset, you lost the depreciated money. It's gone. You account for it the same way you account for buying fancy food or a skydiving trip - it's consumed. And you should feel foolish for consuming it, because you got absolutely nothing with it. At least food tastes good and skydiving is fun. The depreciation on your DVC purchase bought you basically nothing except perhaps a faster time to get your points (for new resorts) and the right to use your points for some stuff you should never ever use your points for. But once you've done it, it's done. Accounting for it as though you could go back in a time machine and undo your consumption is unrealistic.
In no way am I implying that the sunk cost is free. On the contrary, I'm forcing the buyer to face up to the fact that they just sunk a huge cost that they will never get back.
That's fine, but that information was not included in the analysis. I have no problem with an analysis that "writes off" the loss in value, provided that information is included in every example given with the analysis. It needs to have an asterisk. It's not ok to say "I saved $800 on this cruise by using my points as compared to paying cash". It is ok to say that and add "but it cost me $8,500 up front in order to do so". But then that brings me back to my original point...you need to attach a number to that discount in order to have it make sense. Simply acknowledging that it was a bad move or a sunk cost is insufficient.