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January 29, 2007


The Net Present Value of Expected Future Cash Flows

Best bit from Part III of Barron’s 2007 Roundtable:

Meryl Witmer: For ‘07, Navistar say they will be operating-cash-flow positive. They might have break-even results or worse. The analogy I use in this case is, say, some woman is looking to marry a guy and he just got laid off from his job. Should she assume his earnings power over time is nothing? Or should she assume he will probably get a job in six months or a year?

Art Samberg: Has he started drinking yet?

Meryl Witmer: My point is, one year does not make the company. A company is worth the net present value of its future cash flows. So even if a year is zero, that doesn’t make it worth zero.

I’ve been making Witmer’s argument to my wife for many years now. ;-)

This entry was posted on Monday, January 29th, 2007 at 12:14 pm (utc+8) and is filed under Trading and Investing.

6 Responses to “The Net Present Value of Expected Future Cash Flows”

  1. C. Maoxian said:
    January 29th, 2007 at 1:08 pm

    aigaogao: I thought you were a guy; 98% of my readers are men. I’m confident that I will offend you in no time and you will leave me like all the other ladies before you. ;-)

  2. C. Maoxian said:
    January 29th, 2007 at 1:57 pm

    aigaogao: I have an over-35 man’s heart which is full of negative experiences from chasing women half my age. ;-)

  3. Tom said:
    January 29th, 2007 at 9:53 pm

    CM’s a guy? All this time I thought CM’s name was Charlene Maoxian. lol.

  4. Steve Austin said:
    January 30th, 2007 at 5:35 am

    Chairman, does your wife interject with Samberg’s query?

  5. C. Maoxian said:
    January 30th, 2007 at 8:05 am

    Steve: No, but she does draw a “level line” on all the booze with a marker to make sure I’m in check. ;-)

  6. Peter said:
    January 30th, 2007 at 9:39 pm

    have you started drinking yet ?
    (-:

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