Diversified Oil and Gas Holdings (DVFI)

[shermann7]

From RB - poster is noseykibitzer

http://www.ragingbull.lycos.com/mboard/boards.cgi?board=BIGN&read=5060

DID SOME QUICK FIGURING ON THE PR!!!

They are saying the initial oulay (IO)is $1,500,000 and they are using a 10% discount rate (reasonable because that is their factor for weighted average cost of capital)

The "Payout" typically means that this is the point after which they have recovered their costs...I am assuming on a discounted basis, and the same incremental cash flow for the first three years.

1,500,000 = 600,000/(1.10)+ 600,000 (1.10)^2 + 600,000 (1.10)^3...approximately, so they have recovered their IO.

Now on to the fun part

A 47% Internal Rate of Return for the entire project would give an average of @ $950,000/year in incremental CF from years 4 through 19...this is CASH FLOW not revenue.

Basically the hurdle rate 10% is the cost of capital which is what we the investor want our trusted management to exceed. Clearly this is a very profitable and cash generating project.

So right now based upon these figures the Net Present Value of the project is $5,576,275.

$5,576,275/310,000,000 = .01789/share in cash...put a multiple of let's say 10 and the Price/CF for this project alone is .17988...just to give you an idea the S&P 500 trades at around 11 x CF per share.