Using Option Pricing to Predict Market Values of Publicly Traded Mining Companies

What will this deal do to the company’s stock price? This question arises when a publicly traded mining company is presented with a new mine project, or business combination. The standard tool for addressing this question is to use discounted cash flow analysis, or net asset value(NAV), which is discounted cash flow net of liabilities. Cash flow-based analysis is invaluable for assessing project costs and other impacts on debt service capacity and internal rates of return. But cash flow analysis and NAV do not work very well for stock price analysis.