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Gold/Mining/Energy : Crystallex (KRY) -- Ignore unavailable to you. Want to Upgrade?

To: Gutman who wrote (7318)	3/23/1998 11:14:00 AM
From: E. Charters	Respond to of 10836

I know what NPV means. But it is not the only arbiter of value of a stock. No one would suggest that a stock is worth what the value of the investment in the property comes to because the desired rate of return IS SUPPOSED TO COMPLETELY DISCOUNT ALL FUTURE CASH FLOWS AND PROFIT!. So how can you valuate something if you are bringing future profit back to zero? IF someone offered me what I paid for something as a fair payment is he ponying up for opportunity cost too? The cost of my money? What am I in business for? Profit is the key. IF we use an enormous interest rate to bring the future cash flows back to present cost then we say we are earning a good rate of return. This makes the property worth MORE, not less. What if I use 3% as the rate of return? Then what is the gold worth in NPV? Strange isn't it? So if you don't make a good rate of return the property (future income) is worth more? Granted the payout is less so you seem justified in spending more and that is the fallacy of internal rate of return. All is not internal. Money is not reinvested in the business all the time and payouts and earnings should not be the same discount rate. What works against gold works for it in your calculations. Make gold worth a lot by raising the interest rate and the NPV shrinks. But the opposite is true. If interest is high we spend lots and invest in gold AS IT WILL SURELY INCREASE IN PRICE. You have to keep ahead of the envelope. echarter@vianet.on.ca The Canadian Mining Newsletter

To: Gutman who wrote (7318)	3/23/1998 11:38:00 AM
From: E. Charters	Read Replies (2) \| Respond to of 10836

The final analysis of what NPV means is this. If we have distant future earnings that go much beyond payback period times three then They begin to add to the residual value of the business. It is meaningless to discount their earning to today because we are not trying to justify expenditure by those earnings. We try to justify expenditure at required rates of return by the earnings necessary to pay back debt in the near term. What we can make in future years due to the same outlay in the present goes towards making the NPV greater not lesser. The reason is what was paid out to get those earnings? If it is zero then any positive present value is pure profit isn't it? And if there is zero pay out what % rate is required to valuate those future earnings? It can be a lot less can't it? How much do you require to make on free money? So the future or FREE cash flows goes UP not down as they recede into the future. If they go beyond 20 years they are infinite in financial terms. Then the business begins to be valuated more like a sinking fund or a utility requiring much lower rates of return and making its future earnings much more valuable in present terms. Beside are you going to try to predict future gold price and interest rates and operating costs 20 years ahead? Remember the plant and infrastructure are all paid for and the costs are figured to a minimum. If you give me gold mine with a hundred year life in a stable country I would put those shares in an Orphans' fund. echarter@vianet.on.ca The Canadian Mining Newsletter