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Gold/Mining/Energy : Uranium Stocks -- Ignore unavailable to you. Want to Upgrade?

To: james flannigan who wrote (13638)	6/29/2008 10:52:08 AM
From: energy_investor	Respond to of 30201

james, The lower the discount rate the higher the present value of a discounted stream of payments. So, using a "low" interest rate (e.g. 5% ) is going to give a higher PV than using a rate of , say 15%. If you a valuing GEM using 5% then I am not surprised that you are getting a value much higher than the current market cap. There is virtually no allowance in your discount rate for risk. After allowing for risk , a suitable discount rate would have to be much, much higher than 5%. As a result a realistic discounted present value would be much lower than what you have calculated using 5%. I don't own GEM and haven't attempted to value it, but I do expect that a realistic discount rate would be well over 10%. Moreover, I expect the market feels the same way. Cheers Energy_Investor PS If you are a US investor, you should also consider the PFIC tax situation. GEM doesn't offer you the ability to make a QEF election. If you become a long- term investor in GEM and are a US taxpayer you could end up with most of your gains being eaten away by federal taxation and if you make losses not being able to deduct them. ....just a thought.