Fortune, you naughty, dirty little tease.How dare you rev The Business Press Maven up by
They Just Don't Get Number Crunching!
"Now, let's examine the make-or-break numbers. B of A is paying around $4 billion for a franchise that was worth over $20 billion just a year ago. Sounds like it's paying a cheap price. But is the price really cheap? The best way to find out is to use the discounted cash flow technique you learn in Econ 101, and that still proves a valuable guide to estimating the future returns on investments. "To play it safe, let's make some highly negative assumptions. Say that Countrywide takes a $3 billion writedown for 2008, or $2 billion after-tax, and makes no money at all in 2009. Starting in 2010, it returns not to its peak earnings, but to the profits it was generating in the 2003 and 2004 period, around $2 billion a year."Say what? This is an examination of numbers? Something is getting crunched here, but it's good reasoning not numbers. It's bad enough that Fortune uses the $20 billion valuation from a year ago as a reference point. With all the games Countywide was playing and all the fluff in the market, our children's children might not see that again. Crunch that number and you'll chip a tooth.