Where do I say NPV = Profit? I simply use NPV, and a measure of NPV, when I feel the market is still pricing an entity as an explorer potentially transitioning into production after defining a proven and probable reserve - RNU . Just a short cut.
In production it is based on nominal 'cash flow', broadly represented by post tax cash flow btw on a EPS and a P/E ratio.
I am not sure why I need to repeat myself - my post again is here -
Post #:55990978Be free to include your own estimates and viewpoint. I'd be interested on what you think is a fair share price based on the BAM today.
NPV is a discounted cash flow - and the discount rate plays a large factor in that. The significant difference of NPV to EBITDA illustrates that in part.
In production a worthwhile measure is nominal metrics of EPS at P/E10 ratios on post tax cash flow. Some entities operate above 10 and others below - but 10 is ok.
In the above, i.e. BAM, one also needs to actually see what is below the EBITDA line (nominal metric) in terms of interest payments as well and obviously get a gauge of post tax - should they need to get some money for the capex and pay interest btw as well. Given they are forecasting a payback period of 4.5 years, assuming all variables come in, then obviously they assuming tax as well in a short period of time (obviously needing to recover any past losses as well).
If others have a better idea, be good to understand that point of view. These are just high level comments btw for me.
All IMO
Interesting viewpoint. I am not sure you would take it from NPV given interest payments is not included in NPV calculations given the WACC used - discount rate - includes cost of debt and cost of equity component, and the capital component is already a huge negative in the NV calculations.
And noting debt is paid when the project is producing - from nominal cash flows. Certainly an issue for deriving nominal cash flows.
Just a guess.
All IMO
