Chapter 19: Agricola Mining — a hypothetical example
To help put into context many of the issues discussed in this book, a simple hypothetical study is presented in this chapter. The aim is to determine the fundamental value of a company, taking into account the impact of a recent mineral discovery.
Agricola Mining1 is a hypothetical public company listed on a stock exchange. The pertinent information is as follows:
• issued capital: 70 million ordinary shares
• current share price: 50¢
• average daily turnover: $50 000
• shareholders’ funds: $25 million
• cash: $10 million
• debt: nil
• company beta: 1.1.
The company has made an important discovery of the new commodity metallica. After the initial discovery, a large infill ...