Not sure that mixing economic systems works (i.e. working out the mortgage in GT while paying life-support and cargo costs in MgT2).

Mortgages in MgT2 work a similar way as the rest of the Traveller i.e. you pay 1/240th of the purchase price for 12 months in every year for the next 40 years. Total cost of the ship is thus twice the build price. This works out at about a 1.8% return on the banks' investment. Or a 3.98% mortgage interest rate on repayment terms. MgT2 doesn't mention the deposit, which might be why the interest rate is lower.

Life support in MgT2 costs Cr1,000 per stateroom (Cr3,000 in double occupancy), and Cr1,000 per person per week. So life support for two persons (Cr2,000) is covered.

It takes a ton (lost cargo revenue) and costs Cr200,000 and 1 power point, or Cr66,666 and 0.065 tons fuel is 0.1 tons per month (Cr50 or Cr10) depending on which fuel is used.

So Capex cost is Cr266,666 and 1.165 tons used. Or with the mortgage payments Cr533,332 (Capex and mortgage @ approx 3.98%)
Cost to run is Cr24,000 over the lifetime of the ship in fuel
Maintenance costs are Cr2,667 monthly or MCr 1.28
Lost revenues assuming that the ton can be filled for 24 jumps a year with freight @ 50% 1 parsec and 50% 2 parsecs is MCr 1.248
Total costs over 40 years are MCr 3.085

Assuming the ship is crewed 46 weeks of the year (give or take) Opex saving over the lifetime of the ship (40 years) is MCr 3.84

Which equates to Cr18,875 a year saving. And it's a real saving because you have to have the crew. You can't run the ship without them. They are a fixed cost, and the saving is against a variable loss of revenue (you can’t guarantee that you will fill that 1 ton every jump).

Now instead of taking this as a saving if you used it to pay off your mortgage you would be paying just less than an extra months payment a year, which if you had a compound interest mortgage calculated daily you would reduce your mortgage from 40 years to about 32 years (based on a far trader in MgT2) which is an even bigger saving than just the offset opex ...

Best regards,

Ewan

-----Original Message-----
From: xxxxxx@simplelists.com <xxxxxx@simplelists.com> On Behalf Of Alex Goodwin
Sent: 19 February 2021 17:09
To: xxxxxx@simplelists.com
Subject: [TML] Biospheres and Boodle

Well, Collision, you did ask for it.

I'll look at a TTL12 J-2 ship, since that seems to be fairly common in Golden Age settings, and do my best to belt the MGT2 trade bits into some sort of sense.

A dton of biosphere has a sticker price of 200,000 Cr and requires 1 Power.

At TTL12, this gives an incremental powerplant cost of 66,667 Cr and
0.067 dton. (TTL12 fusion plant generating 15 power per dton and costing MCr1/dton).

Assuming I've read the life support rules properly, that saves 2,000 Cr/mo in life support costs.

(Those with some finance background, please bear with me as I fill in those without such background).

You're already familiar with a method for converting a large up-front cost into a recurring payment - ie, a mortgage.  That's what I'll do here.

The annual interest rate implied by the ship mortgage rules works out
(iirc) to 5.56% pa.

GT: Starports p66:

"Starports are normally financed by the issue of low-risk Imperial bonds. These bonds pay a 3% dividend per year, which the SPA must pay..."

Short-dated central-government-issued securities in its domestic market are (usually) regarded as having very low default risk (for instance, the last time the AU federal government defaulted on its domestic obligations was in late 1929), so their interest rate is normally taken as a risk-free rate.

GT: Far Trader p7:

"The return on Imperial bonds (considered risk-free) is so low that people only invest in them to avoid keeping cash around."

This, combined with (GT:FT, p6) "an average annual growth rate of less than 1%" leads me to put an upper bound on the 3I risk free rate of 1% pa.

Given that someone who might back a ship to the tune of X MCr can earn 3% pa on their money while sitting at home, they would logically require a greater return on their capital to put it at risk as equity (ie, ownership stake) in some sort of business.  Likewise, if they can invest in ship mortgages and get around 5-5.5% pa while sitting at home, that further raises the lower bound for the required rate of return on equity.

For simplicity, I'll add the mortgage risk premium (4.56% pa over the risk free rate) onto the mortgage rate, so our punter would require 10.12% pa on their money to back a ship with equity.

As ships are conventionally financed with a 20% deposit (equity) and an 80% mortgage (debt), that works out to a weighted average cost of capital of 6.5% pa.

A Cr266,667 mortgage over 40 years at 6.5% pa works out to Cr1,562 per month.

Thus, at first cut, a dton of biosphere would seem to be a net Cr438/month saving (up until at least covering the crew's life support needs).

Not so fast, livewire.

As Trav ships generally tend towards "stuffed to the gills", they run short of free space.  Where are you finding that 1.067 dton?  What are you giving up?

The default answer is "cargo space", -and the resulting revenue.

How much revenue is lost is a nontrivial question to answer, especially with MGT2's order-of-magnitude increase in freight rates going from 5 pc travelled to 6 (Cr7,700/dton to Cr86,000/dton).  Whether the ship is in tramp (25 jumps/yr) or liner (35 jumps/yr) service also has an influence.

To lower-bound things _on a full hold_, looking at cargo travelling 2 pc
(Cr1,600/dton) on a tramp trader:

Jumps/mo: 2.08

Revenue lost/mo: Cr3,328

Net cost per ton of biosphere: Cr2,890/mo

To break even under that assumption, on average a dton of biosphere has to displace _less than_ 0.13 dton of cargo per month.  For a single dton of biosphere, that works out to the cargo hold not being full at least 88% of the time (assuming no spec cargo).

And I come to pass - out.

Alex

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