M, as a followup to my earlier response to your question, "Will the proposed sales actually happen? If so, how will it result in an increase in earnings power, and how large is that increase likely to be?....
Back to my scenario(ridiculous, but useful for these purposes) where MADERA sells the land for $96,000,000, does nothing other than place it in a bank CD paying 5%....yields $4,800,000 in PRE TAX PROFITS, pick your tax rate.... 25%, I don't know....leaves $3,600,000 net. They only made $1,137,670 net income in '98. The answer is, YES, I THINK IT WOULD MEAN AN INCREASE IN EARNINGS. WHAT if they actually use the money in a business savvy way and deploy it well. Surely they could do better than a 5% pre tax CD. Look, I know it's a silly scenario, but isn't there something to this????? And lastly, while "BOOK VALUE DOESN"T" DRIVE STOCK PRICE", don't kid yourself, any company that "tripled" it's book value with one transaction, as is possible here, would see a dramatic increase in its stock market price. |
