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John Lizak Mineral Valuation & Capital, Inc. December 6, 2011 Northeast Office Mailing Address 1805 Evans St. – Suite 1 Northampton, PA 18067 Phone 610-262-9120.

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Presentation on theme: "John Lizak Mineral Valuation & Capital, Inc. December 6, 2011 Northeast Office Mailing Address 1805 Evans St. – Suite 1 Northampton, PA 18067 Phone 610-262-9120."— Presentation transcript:

1 John Lizak Mineral Valuation & Capital, Inc. December 6, 2011 Northeast Office Mailing Address 1805 Evans St. – Suite 1 Northampton, PA Phone Fax Direct

2 Weighted Average Cost of Capital (WACC) Transactional Data © Mineral Valuation & Capital, Inc. 2011

3 WACC = (E/V x C e ) + (D/V x C d ) x (1 – T c ) Where: C e = cost of equity C d = cost of debt E = market value of the firm’s equity D = market value of the firm’s debt V = E + D E/V= percentage of financing that is equity D/V= percentage of financing that is debt T c = corporate tax rate © Mineral Valuation & Capital, Inc. 2011

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6  Data from guideline publicly traded companies  Transaction data from public & private companies © Mineral Valuation & Capital, Inc. 2011

7 WACC = C d (E/V x C e )+ (D/V x C d ) x (1 – T c )  C e = cost of equity  C d = cost of debt  E = market value of the firm’s equity  D = market value of the firm’s debt  V = E + D  E/V= percentage of financing that is equity  D/V= percentage of financing that is debt  T c = corporate ta WACC = C d (E/V x C e )+ (D/V x C d ) x (1 – T c )  C e = cost of equity  C d = cost of debt  E = market value of the firm’s equity  D = market value of the firm’s debt  V = E + D  E/V= percentage of financing that is equity  D/V= percentage of financing that is debt  T c = corporate ta C d = The average yield to maturity on corporate debt with similar maturity and quality. © Mineral Valuation & Capital, Inc. 2011

8 Capital Asset Pricing Model (CAPM) C e = R f + ß(R m – R f ) Where: C e = cost of equity or expected/required return R f = risk free rate of return R m = expected market return (R m – R f ) = Equity Risk Premium, or the amount by which investors expect the future return on equities to exceed that of the risk free rate ß = beta, the volatility of the company or comparable guideline companies relative to the market as a whole © Mineral Valuation & Capital, Inc. 2011

9 INDUSTRY SEGMENT Building Materials, Cement, Aggregates Companies Coal Companies Precious Metals Companies Oil Producing Companies © Mineral Valuation & Capital, Inc. 2011

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12 INDUSTRY SEGMENTINDUSTRY RISK PREMIUM (from SBBI) Coal Companies Mining & Quarrying (Non-fuel, non-metal) Oil & Gas Exploration Companies Gold & Silver Companies-1.5 © Mineral Valuation & Capital, Inc. (MVC) 2011

13 © Mineral Valuation & Capital, Inc INDUSTRY SEGMENTIndustry Risk Premium * OIL & GAS Royalty Trading Companies -4.0 Exploration Companies Difference -3.0 * SBBI-IA Methodology


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