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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: AK2004 who wrote (28744)	2/24/1998 11:38:00 AM
From: Reginald Middleton	Read Replies (1) \| Respond to of 1572719

<If you still don't get I will try another way: it does not matter what company might have if it would never give it to stockholders or use it to generate more profit. It would have effect on risk premium (part of the discount rate)> It seems you realize you may have made a boo boo, but I assume you are far away from admitting it. If a company has assets on its balance sheets (that are not classified as non-performing) then they are using it in some form or fashion in an attempt to generate cash. If they are classified as non-performing, yet are still of some value, then they can add value to the firm in the form of potential synergies with another entity (as the proportion of non-performing assets that have value increase, so does the likelihood of a take over - imagine if AMD had 20 fully functional FAB's, but MGMT just could nto make money and the share price drops to two, what do you think would happen?). Your statement contradicts your previous one. "it does not matter what company might have if it would never give it to stockholders or use it to generate more profit." Well, suppose they will use those assets to generate profits, then what? You previously stated that only future cash flows count, now you are putting a condition on your statement. What about existing assets? Brand value, current capital, patents, human capital, FAB's, work completed under the constuction of new fabs, etc. The list should look like this for a three year horizon: Present Value of Cash Flows - Year 1 Present Value of Cash Flows - Years 2-3 Present Value of Capital Asset Value of Company Plus: Option Proceeds 1 Plus: Excess Cash 2 Less: Total Debt 3 Gross Equity Value of Company Equity Value Per Partially Diluted Share Less: Executive Compenstion Option Liability4 Equity Value of Company Equity Value Per Fully Diluted Share 5 Market Over/Under Valuation Equity Value as Multiple of 1997 Earnings Terminal Value % of Asset Value in Capital % of Asset Value in Cash Flows <You know, you discount the cash flows with different rates.> No I didn't know that. Why don't you explain to me (and the rest of the thread) why you would use different discount rates and what would those rates be. Why would they not be arbitrary and capricious? How would they be calculated? At least your last post was more polite. Your learning.