Forum Archive Index - April 2001

["Nigel Wilson" <nj_wilson@hotmail.com>]

Okay, someone's gonna have to spell this out to me.  The figure of 1.4 has been calculated, and the statement made that for every 1 cent increase in FFS, RBC will increase 1.4 cents.  Am I reading that correctly?  If so... how does it work?!

FFS current price = 31 cents.  If this price doubles, eg a 31 cent increase, FFS will be priced at 62 cents, a 100% return.

Imagine I bought into RBC at 45 cents.  While FFS increases by 31 cents, RBC will have increased by 31x1.4=43 cents.  Its new price would be 88 cents, only a 95% gain - still great, but not as good as FFS alone.  Porobably  I am completely missing the point here, but I thought that the relative worths of each share would depend on the extent of improvement of FFS price, and of the performance (good or bad) of RBC's other assets.

Could someone please explain where I'm going wrong!! Why does everyone understand this except for me?!!!

 

Cheers,

Nigel.

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