Eagle River review. [volume] (Eagle River, Wis.) 1890-1927, 1920-05-21

terrupted Angela, who had been fidget-
ing and playing with her wrist watch.
'Dad-Mr. billiard! This is awfully
minutes, and"
PLENTY of time," said Cullen, wav-
ing her off, 'Plenty of time! Go
ahead, Mr.. billiard. This is too good
to miss. Smoke a cigarette for an
appetizer?"
Thank YOU" Hilliard, having de-
cided to take complete advantage of
the present opportunity, marshaled
salient details as he held match for
his host. We'll, perhaps | can show
you best by an actual example. I'm
out of the game entirely, as | said,
to join New York syndicate in
financing property / appraised my
self in 1914 It's owned at present by
four boys with shoe-string apiece.
They can't finance it themselves. so
they need help, and they've come to
Wall street and whispered their Sc
cret through megaphone. Now sup
pose, just to make it clear all around,
that you and and Angela are to form
syndicate to underwrite the COM
pany." He was sustained by the re-
Election that even though he came in
the guise of mountebank, there was
nothing tlishonorable about the wares
he had brought to sell.
"Ooh!' said Angela, joyously,
THANKS ~
simultaneously her father gave her
a little frown of affectionate remon-
st ance, and billiard gave-her little
smile Of afectionate esteem.
Nov, the boys who own it" said
billiard, fare in such straits that we
can practically dictate our own terms.
| don't mean to imply that we'd take
too great an advantage of them, but
it's a plain case of supply and de-
mand, and we're naturally interested
in a bargain. We go over the mine
/ very carefully, and find that although
it isn't actually producing any copper
just yet, because the, owners ran out
of money before they could get that
guarantee at least ten thousand tons
year for twenty years, provided the
necessary equipment is bought and put
into operation. That tonnage, with the
price Of copper where 1t Is now
around thirty cents-and the cost of
production what it is now, and other
factors what they are now would
eventually mean net profit of about
quarter of a million dollars a year.
SO first we have these present owners
organize a corporation, capitalized at
two million dollars"
Cullen smoked violently, and looked
puzzled.
you're getting out of my depth.
How do you arrive at that?''
THAT'S so as to insure ten per cent
dividends. And the mine can pay ten
per cent, provided we can arrange to
get the capital. You see, Mr.. Cullen,
a copper mine isn't like factory, and
you can't figure it the same way, be-
cause a factory runs on indefinitely,
and If you simply replace the ma
chinery whenever it wears out, there's
nothing to prevent the same plant
| from keeping on making the same sort
of product for hundred years. But
every pound Of ore you take out of
mine leaves that much less for the
future and eventually your ores go
ing TO be all gone. And if this par
ticular mine is going to be exhausted
In about twenty years, 1t stands to
reason that It's being exhausted at the
rate Of one-twentieth, or five per cent,
a year. You must take that always
into consideration. And therefore,
every stockholder is entitled to get
back at least five per cent of his
money each year to cover that de-
preciation, in addition to whatever he
ought to get for ordinary profits, which
is another five per cent. Otherwise
.Oh! / seel" cried Angela.
ssProve it !" commanded billiard in
diligently.
'sWhy, If the company just paid five
per cent for twenty years, and ar the
end Of it, your ore was all gone, the
people would only just have got their
money back, and they wouldn't have
made any real profit at alf!'
Exactly" said billiard. $50 the
company must pay at least ten per
cent-half for bona fide dividends and
half for depreciation"
"Oho!' said Cullen, opening his
eyes. rs that why the big mining
companies pay such big dividends? !
thought 1t was all clear pr0ft!'
mo, sir. The dividends of min
ing company have to be very high to
be attractive at all: they have to
make good that depreciation. Well,
we make the boys incorporate, as /
said, for two million dollars, on which
we can pay ten per cent. I'll show
you what the setup looks like" He
wrote on the back Of an old envelope:
| Capitalization 100000 = 100000
shares at SO each.
snow, the company (and you must
remember that so far we haven't
any official connection with it), agrees
to take over the property, and pay the
present owners for it with $4,000
shares of stock, and it also agrees to
sell to you and Angela and me the
other 10000 shares at dollar apiece,
or $120, 900, of which we agree to pay
half in cash, and the balance in about