No. of Recommendations: 16
But what are these future earnings worth now? I hope you agree that they need to be discounted back to present using an appropriate discount rate.
This is an interesting discussion. I spent a fair bit of my career calculating the "Net Present Value" of known oil reserves in the ground. The amount of oil in the ground would not change, but the discount rate used drastically affected the value of it. You can't just pick up the oil and sell it, you have to invest in drilling and production facilities, then wait as it dribbles out over the life of the wells. The exact same amount oil in the ground that would be profitable to produce during a time of low discount rates would be have no value in a high interest rate environment.
