Hi all,
I wonder if this even makes sense,
I need to calculate how much a client would pay for a unit of commodity. The commodity will be extracted and delivered over the course of 30 years. So the client will have some revenues and expenses in this years. My calculation is: take the NPV of client's EBITDA and divide by the quantity of commodity they receive over this time. However I think this could be better, if I also took the NPV of the quantity of commodity in the denominator to also have the quantity in PV.
Think like: a gold mine extracts 1000Kg of gold over 30 years, so it seems to me we can bring this quantity to present, since gold is highly liquid, so what's the difference between discounting the $ amount it yielded and the quantity (1000Kg) directly? we would get some 300Kg or so in PV terms. Does this make sense?
Do you think this makes sense and if so, then how do I take the PV of quantity? What discount rate to use? Just the normal WACC?
Any ideas on this?
Best!
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