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Thursday, September 25, 2008 6:16:11 PM
One purchases/acquires a product in the rough with a potential finished market value of $50m dollars for say $5m dollars with an expected cost to market of $25m dollars. Over time the product's potential value has increased to $400m dollars due to demand.
The cost to recover/bring to market may increase slightly to say $35m dollars, but the value potential has increased greatly by a factor of 15. Do I now spend the time/resources to bring that product to market knowing the value will fluctuate, possibly dramatically, which will have a great affect on my net profit at the end.
Do I have the resources to even do this? What would it cost me to acquire the resources if I don't have them?
Or..... do I take that $5m dollar investment and turn it for a $35m dollar profit with the swipe of a pen?
I know this is just a hypothetical, but in all actuality this type of transaction happens everyday. Companies are defined by what they do...a middle man buys/sells a product...hopefully in volume to maximize profits and create a customer base for repeat business. An expert business at recovery/market delivery may very well rely on a business that researches and discovers the potential and then sells that potential for a nice profit and goes on looking for the next potential.
Not saying this is what actually is happening, but a company's CURRENT needs greatly influence their CURRENT actions, regardless of past future plans.
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