financial model - ndo - investment bank analyz, page-59

Great posts everyone and a nice level headed egoless thread.

May I add here what the great Benjamin Graham thought of DCF theory......

"Making ever so slight changes to the interest rate used for discounting, for example, can double the theoretical value...or cut it in half."

"....the concept of future prospects, and particularly of continued growth in the future, invites the application of formulas out of higher mathematics to establish the present value of the favoured issues. But the combination of precise formulas with highly imprecise assumptions can be used to establish,or rather to justify , practically any value one wishes, however high, for a really outstanding issue.....
Mathematics is ordinarily considered as producing precise and dependable results: but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw from them."

So after reading the above , i view future cash flow with sckepticism and 11.6 bill barrells with envy. But it still has a value. ie whats the chances of just 1 billion being proven up, can i price that in now? Comes down to a time horizon as well. Hence we have buyers and sellers.

Nice models thanks Mr Banker, and great critique OPT