Comparing Costs with Different Time Periods

How do you compare costs with different time periods?

To answer the above question, people who have no background in Economics or Finance will just ignore the difference in the time periods of costs. So the analysis becomes simple, it is a matter of comparing the cost items. The resulting comparison while theoretically is wrong is practical especially under three (3) conditions:

1. The time period involved is too short, say 2 years;
2. The amount is too small, say a few hundred pesos; and
3. The interest rate is too low, say less than 1%.

Whoa! interest rate? What has interest rate got to do with comparing costs? Well, interest rate is the cost differences between the two periods. Say if you got P1.00 now and you place it in a bank for 2 years and your deposit registered P1.20, the P1.00 now can be said to be equal to P1.20 after two years. The differences between now and the future value is the interest rate earned or foregone. Economists refer to this as the "opportunity cost of capital".

In most investments situations, you will be faced with decisions involving costs at difference time periods. So it is best that you know how much is the interest rate. In the above example, the interest rate is 10% per year.

So when comparing costs at different time periods, know the interest rate. Use it as a gauge in deciding which costs are higher or lower. In investment decision-making, if the yield from an investment is say 20% and the interest rate is 10%, then you gain by 10% if you decide to invest. Assuming all other things to be equal.

If however the investment yield is only 5%, and the interest rate is 10%, then the investment is not attractive since you will actually be losing 5% have you decided to put your money in the bank that yields 10%.

In short, faced with an investment decision problem, don't just compare costs without regard to its time period. You may lose money in the process. But if it does not involve much money, then perhaps, it is just practical to compare costs without regard to its time period.

Page Numbering in OpenOffice

Of late, I have to write a long report. So being an open source enthusiast, I decided to use OpenOffice instead of Microsoft Office. Guess what? Page numbering under OpenOffice is a bit cumbersome. In fact, I have to search the web for answer and it would seem that I am not the only one experiencing the problem. So after some playing around with OpenOffice, I finally was able to do the things I need for a long report. Here it is...

(1) Page Numbering

The procedure is to go "Insert->Footer->Default", then "Insert->Fields->Page Number". If you want your page number to appear in the header, use "Insert->Header->Default", then "Insert->Fields->Page Number".

Quite cumbersome, but still if you are an old hand in using computers, you may eventually figure that out. Here is the more difficult part. How do you insert a page number that does not start with page 1? It took me hours to figure it out. But since, I cannot find a solution also online, I had vowed to post the procedure online. Here it is...

(2) Starting a page number not from the default page 1, say page 20 ...

The procedure is to locate your cursor on the first paragraph where you want the page to start. Then, go "Format->Paragraph" then select the "Text Flow" tab. Under the "Breaks" line, check the "Insert", and check the "With Page Style", then indicate your desired page number under "Page Number".

Very cumbersome. I think, the creators of OpenOffice can make this more intuitive since regularly writers will need this feature. Sigh!