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How much is my cat worth to me?
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THE SCENARIO
I've got a beautiful, timid, half-feral little beast who loves to purr and be pet while she's eating. I'm quite fond of her, but I got to thinking this weekend 'How much does Whimsy cost me?'
I ran across this post in trying to get a rough answer to this question:
http://www.peteducation.com/article.cfm?c=1+2137&aid=1542
Since I'm trying to answer the question, but I don't want to think too hard about it, I'll just assume that I'm the author of that post, and I'm going to assume that there's no variance between year-one cost and the cost of subsequent years. In totaling the costs of food, litter, cat-sitting, veterinary care, and so on, the author came up with an average annual cost of $527 per year to own her little fur-beast. She then estimated that her cat would live for 14 years, multiplied $527 by 14, and came up with the figure that her cat will cost her $7,713 over its lifetime.
Using my financial calculator, however, I suspect that I can prove that my cat is
much more valuable than hers.
The first thing I'm going to do is assume that my cat costs the same as hers per year, and that its costs are uniform throughout each year. So I pay $527 / 12, or about $44 per month.
I know that 14 years is 168 months.
I also know that if Whimsy were to not be making my life the heap of smiles and accidental scratches that it is today, I could invest that money and earn a 10% annualized return.
So the question is, how much is Whimsy worth to me?
THE SOLUTION
Making sure my Payments Per Year setting remains at 12, I set up the problem like this:
N: 168
I/YR: 10
PV: 0
PMT: -44 (I could invest the money I'm currently spending on the little furball)
FV: [This is what I'm trying to find]
Now, you may ask me why I'm solving for FV and not PV. The reason is that I'm trading the future money I would have had if I'd have invested the money instead of pampering my little crazy ball of teeth and claws.
When I plug everything in, I determine that Whimsy is worth
$16,007.60 to me. Who's a good kitty? YOU ARE!
purr, purr, purr
