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clock Created with Sketch. 06/10/22
20:47
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Originally posted by HOOPZ:
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Yes they do. The NPVs are calculated by using a Discounted Cash Flow approach where all future cashflow (inflows and outflows) are added together on a discounted basis (usually at a rate of 8%). This just means that as you move further into the future the cashflows are discounted more heavily (e.g. after 10 years they are discounted by 50%, after 20 years they are discount by 80% - when using an 8% rate). In this model any capex including initial capex is considered to be a cash outflow so it will reduce the overall cashflow and therefore the NPV amount. Because the majority of capex is spent in the 1st year(s) it is discounted the least (or not at all) - this can have the effect of reducing the NPV by the full amount of the initial capex.
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That is what I figured in terms of the NPV, and thanks also for explaining your other method. On these merits it seems crazy how undervalued GLN is. Surely other investment would have performed similar assessments with similar results.
(20min delay)