Mr Burt, your calculations are flawed – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

Log In

Reset Password

Mr Burt, your calculations are flawed

Dear Sir,

Like many Bermudians, I am following the airport redevelopment project closely.

This is an important capital project that, I believe, deserves real scrutiny by the voting public.

There have been many claims thrown around about the future earnings potential of the airport. At a recent town hall meeting, PLP Shadow Minister of Finance David Burt calculated the future earnings of the Bermuda airport to exceed some $2 billion.

An alarming figure, to be sure, but the method used to calculate it is probably even more curious.

Indeed, Mr Burt accumulates the current earnings of the airport over 30 years at a 2.5 per cent inflation rate.

This is unlike any project valuation method I have ever seen. I have an undergraduate degree in finance, as does Mr Burt, so I find it unlikely that he would not understand such a basic concept as net present value — or how to complete a discounted statement of cash flows. Mr Burt must understand that a dollar today is worth more than it would be 30 years from now — in much the same way as a dollar today is worth much less than it was 30 years ago.

Rather than accumulate using the rate of inflation, Mr Burt should have discounted these future cash flows to the present time period using some opportunity cost of capital. Not the rate of inflation.

I believe Mr Burt to be intelligent and often appreciate his contributions.

However, as someone who wants to be finance minister, Mr Burt must understand something as basic as the net present value of future cash flows to value projects.

I don't know which would be worse: that he does not know this or that he is deliberately misleading people in his purposely outsized calculations.


David Burt, the Shadow Minister of Finance (File photograph by Akil Simmons)

You must be Registered or to post comment or to vote.

Published August 24, 2015 at 9:00 am (Updated August 24, 2015 at 2:05 am)

Mr Burt, your calculations are flawed

What you
Need to
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon