teaklog2 t1_j8en6y4 wrote
Reply to comment by chuckescobar in If you “lose” a citibike by ar1680
it’s probably based on expected revenue the bike would bring in
chuckescobar t1_j8ev3lj wrote
That would be a crazy line of thinking. So if I have a vacation rental that burned to the ground I should be reimbursed future income from the insurance company?
teaklog2 t1_j8f0yt6 wrote
it’s how things are valued just in general…
and this isn’t an insurance company assessing claims, this is you making a contract with the company by using the product
chuckescobar t1_j8hpmzy wrote
So if someone accidentally burned down my vacation rental while using it as long as I have the correct verbiage in the contract they have to pay for all future income. Got it
teaklog2 t1_j8ivjfq wrote
all future income...discounted to present value at a discount rate...
yes, quite literally
So if the house generated $100,000 in rental income annually forever...and the appropriate discount rate is 10%, then yeah they would be on the hook for $1m
In the same vein that in a wrongful termination lawsuit you can receive not just the income from the period you weren't working, but to be compensated for expected future income based on a number of factors.
This isn't some crazy concept dude, its the foundation for valuing literally anything. If I burned down someones rental property I would expect to be on the hook for the present value of future cash flows. Things can be worth more than their material cost my guy. In a similar vein, say you're at a store and you break a lamp costing $10,000. It doesn't matter if the lamp's materials costed $1000...the expected future revenue from selling that lamp was $10,000 which is what you owe. You can't go into a store and break $200 headphones and tell them 'oh well, the material cost of the headphones were only $20 so I'm giving you $20 and we're even'
its literally one of the fundamentals of how you set a price for anything that generates cash flows
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