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

To: Kevin K. Spurway who wrote (28746)	2/24/1998 11:37:00 AM
From: AK2004	Respond to of 1572719

Kevin you are right about liquidation part, can not argue with that. But what counts is a liquidation of stockholders assets that is stocks. If both companies have close to zero probability of going under then there would no difference what-so-ever. If there is an equal but high probability of the companies going under than there might be a difference but only in a discount rate. Recovery unlikely to be higher than the given value of the stocks otherwise the companies would just borrow and stay afloat. In short if both companies are to pay $100 dividend in the nearest future (to minimize effect of risk exposer) and never to pay any dividends again (sounds like MSFT) then the values for either of the companies would be exactly $100. Regards -Albert ps you are right about the real world but it is usually assumed that companies like MSFT would eventually start paying dividends so stockholder would be able to take money off the table.

To: Kevin K. Spurway who wrote (28746)	2/24/1998 11:51:00 AM
From: Reginald Middleton	Read Replies (1) \| Respond to of 1572719

<You have two companies with the ability to generate $100 of future cash flows as discounted to present value. Company A has 2 billion dollars of gold assets in its coffers, company B has nothing but the $100 worth of expected cash flows. Do you really mean to tell me that you would value these two companies as equals?"> I would if there were no possibility of liquidating either company. Suppose the companies were Gold Mining companies, would you still feel the same? How about if they were both chip manufacturers, and Company A sells its assets for 2 billion dollars in cash on the market and uses it to buy a state of the art fab and open up additional channels of distribution or triple its marketing efforts, would you still feel the same? Assets have value. That value is often mistated on balance sheets for it is not carried at market value, but they still carry value nonetheless.