Doug,
On the one hand you say NPV is more appropriate and then flip-flop to a simple ROI. Which one is it? Actually, I computed the IRR, not an ROR. There is a difference among ROR, ROI, and IRR.
Deciding what discount rate to use to compute the NPV is often subjective.
Although your suggestion has some merit, I’m not talking about 401k contributions or any other type of investment. If you know of any investment that yields an after tax IRR of 30.4%, please share and I’ll get right on it!
I’m simply restricting the discussion to the lease and the implicit rate of return one would achieve as a result of paying MSD’s to lower the lease rate… nothing more. No need to discuss a 401k which is a completely different topic. However, it is certainly an alternative to MSD’s.
You also stated…
“In NPV terms, if you were to contribute the $2025 pretax to a 401k (in a 1 time lump sum), and assume you’re in a 24% tax bracket, your NPV on the MSD’s is only +$200, less if you assume compounding interest on the 401k contribution.”
Frankly, I have no idea what you’re talking about and I’m a mathematician and an actuary. I want to see you calculation. How did you arrive at an NPV on the MSD’s of only +$200? Please elaborate and include your underlying assumptions including discount rate.