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# Nautilus Inc. Message Board

• yahoo yahoo May 12, 2005 5:38 AM Flag

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• aplz_to_aplz_dust_to_dust aplz_to_aplz_dust_to_dust Jul 12, 2003 10:05 PM Flag

woops, I did the math wrong at the bottom. My calculator tells me the net present value per share should be

10%*\$0 + 40%*7 + 40%*27 + 10%*40
= 0 + \$2.80 + \$10.80 + \$4
= \$17.60.

Close enough to my earlier \$16.80 but I've checked this more carefully.

I'm surprised that the estimate is coming out so high. I'd expect it to come out closer to recent prices. But \$17.60 seems to lie in a kind of no-man's land in between the "pre-October" and "post-October" price ranges.

• aplz_to_aplz_dust_to_dust aplz_to_aplz_dust_to_dust Jul 12, 2003 9:55 PM Flag

Maybe it was an error, astral, but your "gloom & doom" case crept up to \$10. Just for variety, let's put my 6.5% discounted values back in for the "G" and "E" cases.

I've also toned down the probabilities on "D" and "W", and docked "W"'s value to account for my 6.5% risk-free discount rate.

"D": value \$0
probability 10%

"G": value \$7
probability 40%

"E": value \$27
probability 40%

"W": value \$40
probability 10%

Total net present value = 10%*\$0 + 40%*\$7 + 40%*\$27 + 10%*\$40 = \$16.80

Well, it's a far cry from \$60, but not much like \$0 either. This is an interesting problem.

• Sorry, I can't accept that zero liquidation value is a highly likely outcome. What you've got there is:
"D" a disastrous, no-liquidation-value case,
"G" a liquidation value case, and

While each outcome might be possible, I think you could be more inclusive. How about we add a "Wow" case:

"D": value \$0
probability 25%

"G": value \$10
probability 25%

"E": value \$36
probability 25%

"W": value \$50
probability 25%

Total: 25%*(\$0 + \$10 + \$36 + \$50) = \$96/4 = \$24 intrinsic value per share

I think that \$0 and \$60 are less likely than \$10 and \$36, but any of the outcomes is possible. This pretty much covers the range of what I've seen posted here.

• aplz_to_aplz_dust_to_dust aplz_to_aplz_dust_to_dust Jul 12, 2003 3:03 PM Flag

Well, maybe so. The "negotiation" concept really does appeal to me. But I think you're being way too aggressive pushing your own set of numbers.

• I think that my original scenarios capture your "D" case just fine:

If you want to include a little for individuals with exotic opinions like \$0 intrinsic value, give 'em 5% off the "G" case.

"G": (business fails & goes into liquidation)
\$5 per share intrinsic value.
45% probability

"D": \$0 (bizarre, unlikely case. executives go to Brazil with all the cash & trademarks in a briefcase.)
5% probability

"E": (repeat of three-trailing-years)
\$36 per share intrinsic value.
50% probability

total: 45%*\$5 + 5%*\$0 + 50%*\$36 = \$19.75.

That I can live with.

• wtf? How do you get 33% probability that the company collapses with zero liquidation value? I just don't see it, even the fucking Nordic Track sold for \$8 million, even AFTER CML's economic collapse. PLUS there's NLS's cash money.

Maybe 5% probability for the "D" scenario, or maybe give it a reasonable liquidation value.
Present book value is about \$7. Take about \$5 non-cash equity, lose 40% of that (\$2) in liquidation, and add in the present \$2 of cash. That brings the "D" scenario (why 'D'??) to \$5, a far cry from your half-assed \$0 number.

• aplz_to_aplz_dust_to_dust aplz_to_aplz_dust_to_dust Jul 12, 2003 10:21 AM Flag

Au contraire, my hydra-headed friend. The post looks quite sensible to me. I'd much rather see wrangling over the numbers in (or of) some set of well-defined cases ("scenarios"?) than continued personal disputes and ex-cathedra pronouncements.

I don't care (and can't easily guess) whether each poster is personally credible or not. Just let him post something I can understand and evaluate.

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