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Message: A simple Financial excercise for the layman

Here is something I did for someone on the weekend who owns some ZEN but was having trouble wrapping their head around a billion + dollar bid. Many of us have trouble grasping these huge numbers - why would someone bid a Billion dollars for this Company? A Billion?

So, for the average Joe, let's put it in terms we can relate to.

Take our 'standard' information as we know it today, $8500 selling price, $2,000 cost, 50,000 tonnes per year for 25 years.

Let's assume someone bids $20 per share, essentially $1.2 Billion plus they have to add $300 Million for Capex for a total of $1.5 Billion.

Now for us common folk who do not run multi Billion or Trillion dollar multinationals, we will simply lob off 5 zeros and we end up with:

For an intial investment of $15,000 we get $3,250 annual return for the next 25 years.

Who would not make that investment in their RRSP today?I would like a whole bunch of those in mine.

And for each $1,000 increase in per ton profit the return increases by $500 annually. So a $12,000 selling price returns $5,000 annually.

These big Companies think just like we do, only on a much larger scale. The math remains the same.

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