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We introduce a new approach to estimating long-term aggregate discount rates using the cross section of earnings and book values to explain current stock prices and extract expected market returns. The proposed discount rate measure is countercyclical. Shocks to it account for nearly half of historical market return variation; in contrast, shocks to other discount rate measures account for no more than 2%. It dominates other measures in explaining time-series variation in returns on duration-sorted portfolios and delivers out-of-sample predictability that exceeds that afforded by other expected return measures and predictive variables. It also performs well in international equity markets. [ABSTRACT FROM AUTHOR]

We decompose the total value loss around firms' announcements of financial restatements into components arising from investors' revisions in cash flows and discount rates. First, relative to population benchmarks, restatements represent circumstances in which the cash flow component becomes more important in explaining valuations. While we find significant contributions from both sources, with the cash flow component explaining more than 33% of the variation in stock returns surrounding restatement announcements, this component explains only 13% to 22% in comparable non-restating firms. When restatements are caused by underlying financial fraud, the discount rate impact becomes more important, explaining about 88% of return variation. On the contrary, the cash flow impact is relatively larger for firms with higher earnings persistence or restatements associated with errors. Our decomposition of the value loss helps explain returns in the post-announcement period. Firms with a higher relative discount rate impact experience a significant downward stock price drift after the initial announcement-related price decline. For firms with a higher relative cash flow impact, the evidence suggests the initial impact of the restatement announcement is more complete with no subsequent drift pattern. Our findings close gaps in the evidence on financial restatements and extend the literature on the drivers of stock price movements. [ABSTRACT FROM AUTHOR]

Pit Z at the Binungan site contains substantial coal reserves, estimated at around 10.77 million metric tons based on Life of Mine (LOM) data. The current issue involves the breakdown of the crusher unit at the crushing station during the processing of Pit Z coal. Further investigation revealed that the damage was caused by the Hardgrove Grindability Index (HGI) of Pit Z coal (29-36), which is lower than the crusher unit's specification (HGI ≥ 40). The HGI measures coal's resistance to crushing; the lower the HGI value, the harder the coal is to crush. This study aims to evaluate the financial feasibility of constructing a New Crushing Station, utilizing the Discounted Cash Flow (DCF) method with incremental cost analysis. The construction of a new crushing station yields the following financial parameters: NPV of Rp. 60.236 billion, Profitability Index (PI) of 2.69, IRR of 61.65%, Payback Period of 1.63 years, and Discounted Payback Period of 1.81 years. Sensitivity analysis indicates that coal production is the most sensitive parameter affecting NPV, with a ±20% change in this parameter resulting in a ±33.69% fluctuation in NPV. Additionally, Scenario Analysis and Monte Carlo Simulations reveal that the worst-case scenario produces an NPV of Rp. 54.581 billion, the best-case scenario an NPV of Rp. 64.498 billion, with a 0% probability of NPV < 0, and a 47.28% probability of NPV exceeding the Base Case. This study suggests that constructing a new crushing station is financially viable with manageable risk. [ABSTRACT FROM AUTHOR]

The global coal market experienced three turbulent years, with a sharp decline in demand during the Covid-19 pandemic, followed by a rebound in demand post-Covid and after Russia's invasion of Ukraine. In 2022, global coal demand reached an all-time high of 8,415 million metric tons, driven by growth in China and India, and continued to rise slightly by 1.4% to 8,536 Mt in 2023. The downward trend in coal prices poses challenges for mining companies, including PT Berau Coal Site Binungan Mine Operation (BMO). This study aims to address the frequent breakdowns of the CR12 crusher at BMO, which result in increased maintenance costs, production downtime, and reduced overall efficiency. Using Total Cost of Ownership (TCO) calculations and the Discounted Cash Flow (DCF) method, the Net Present Value (NPV) of several secondary crusher brands--Joy (existing), MMD, and Shumar--were compared. Results show that Joy has an NPV of -$5,822,030, MMD has an NPV of -$4,527,456, and Shumar has an NPV of -$2,559,450. The negative NPV indicates total costs, where a smaller NPV is preferable. Incremental calculations show that MMD has an NPV of $1,294,575, and Shumar has an NPV of $3,262,581. Based on this analysis, Shumar was selected as the replacement for the CR12 crusher due to its low NPV and cost efficiency. [ABSTRACT FROM AUTHOR]

Pit J is a new pit at Binungan 8 that will be developed to the west in 2024 and has a mine life of 9 years. The initial plan was to develop Pit J, which produced around 23 million tons of coal. However, there is a second alternative that can increase Pit J production to 28 million tons. Therefore, a project investment analysis of these two alternatives was conducted to determine which mining scheme to take and which is more profitable. This research uses a method of conducting investment valuation of the Pit J mine project, namely discounted cash flow (DCF). A deterministic approach using DCF was first conducted to determine the value of economic feasibility parameters, including net present value (NPV), internal rate of return (IRR), and payback period. This was followed by the identification of variables that most affect the NPV value through sensitivity analysis. Based on the research, both mining alternatives were declared financially feasible through the discounted cash flow method, with the first alternative having an NPV of 65.8 million USD, IRR of 60%, and a payback period of 4.77 years, while the second alternative resulted in an NPV of 88.4 million USD, IRR of 65%, and payback period 4.55 years. Sensitivity analysis shows that the variable change in Coal price is the most sensitive variable to the valuation of Pit J. Therefore, the second alternative is chosen as the best alternative to run. [ABSTRACT FROM AUTHOR]

Aiming at the deficiencies presented by the traditional methods of highway project investment evaluation, the proposed highway investment evaluation method was based on system dynamics. First, we constructed an evaluation index system from profitability, solvency, and risk resistance and clarified the positive and negative causality within the investment evaluation system of highway projects; second, we determined the boundaries of the system dynamics model and divided it into six sub-systems, namely, income, cash flow, investment evaluation, profit, cost, investment and financing, and liabilities; and then, we established the system dynamics model of highway investment evaluation based on the sub-systems. The model made up for the limitations of the traditional discounted cash flow method; finally, taking the China's Yunnan Province an Expressway project as an example, using VENSIM software simulation, we get the evaluation results of the system dynamics model and make a comparative analysis with the discounted cash flow method, which showed that the calculation inaccuracies of the NPV and other financial indicators were in a reasonable range, and the evaluation method had strong operability and practicability. The system dynamics investment evaluation model provided a systematic, intuitive, whole-process investment evaluation method, which provided a theoretical basis for the analysis and decision-making of the investment effect of highway projects. [ABSTRACT FROM AUTHOR]

Dealing with risk and addressing risk consequences constitute indispensable and specific elements of every business activity. The aim of this paper has been to assess the level of risk connected with the process of exploitation of hard coal deposits used for the production of coke in Poland, that is why a methodology has been developed which takes into account the impact of significant risk factors resulting from both geological and mining conditions upon unit cost of coal mining. This methodology constitutes a comprehensive approach to sustainable management of hard coal resources. The key source of information pertaining to exploitation risk factors is the digital geological model of hard coal deposit which has been developed. It comprises a structural model as well as a quality model of the basic quality parameters of coal. Structural models and coal quality models have been developed on the basis of litho-stratigraphic profiles from geological exploratory boreholes and underground observations (boreholes drilled from underground workings and their profiling). The structural grid model also contains information on tectonic disturbances (faults) or sedimentation disturbances (intercalations, wash-outs, and the like). The digital model was used as the basis for devising time schedules of development and preparatory works, as well as coal extraction proper. Historical results of mining and economic data from 81 longwalls mined in the years 2016–2022 have been used for the purpose of analysis of the impact of risk factors on unit operating costs. The analysis comprised a total of 23 criteria which influence the costs of mining. From that group, 10 risk factors have been selected by means of statistical analysis using segmented regression, these factors have been utilized to make an assessment of the forecast concerning risk factor level for zones of the deposit meant for mining until the year 2035. The risk factors taken into account were those which are due to natural hazards, geological structure of the deposit (coal seam) and technical limitations. Risk factor (RF) indicator has been developed, for its construction the Fuzzy Analytic Hierarchy Process (FAHP) has been used. The value of RF, which expresses the aggregated form of variability concerning individual factors pertaining to geology and mining, has been used to determine the adjusted own risk assessment when estimating the economic efficiency of the coking coal deposit for 8 exploitation zones with the use of discounted cash flow method. The assessed average value of RF for the entire deposit amounted to 0.29. The lowest level of RF was noted in case of zone W (RF = 0.17), whereas the highest value of risk occurs in zone PN (RF = 0.64). The values of RF were used to calculate the rate of discount as consolidated measure of own risk, when assessing investment projects in mining. For zone W with the lowest risk of mining the discount rate amounts to 8.34%, whereas in case of zone PN which has the highest risk level, it amounts to 15.02%. Assessing the level of mining risk provides the possibility to optimize the cost of mining, and may be utilized for making decisions concerning the sequence and time of mining from particular zones of the deposit. [ABSTRACT FROM AUTHOR]

The global energy landscape is undergoing a significant transformation driven by the urgent need to mitigate climate change, increased regulatory pressures, and rising stakeholder expectations. This study aims to explore the impact of ESG integration on the financial performance of Pertamina Geothermal Energy (PGE), a subsidiary of PT Pertamina (Persero), which plays an important role in the energy transition in Indonesia. This study uses secondary data from financial statements, prospectuses, annual reports, and information from the PGE website. In addition, historical data on the stock prices of power generation companies and comparative analysis of the industry are used. The analysis was carried out using the Discounted Cash Flow (DCF) method to calculate the intrinsic value of the company, as well as an assessment of sustainability policies, community engagement programs, and improvement of corporate governance. The results show that ESG integration has a positive impact on PGE's sales growth, profitability, and return on investment. Improved sustainability policies, community engagement programs, and corporate governance contribute significantly to better financial performance. The integration of ESG principles in PGE not only improves financial performance but also shows that sustainability and profitability can go hand in hand. These findings provide valuable insights for the broader energy sector, suggesting that ESG integration can drive positive change and facilitate an era where financial growth and environmental responsibility complement each other. [ABSTRACT FROM AUTHOR]

We propose an industry volatility spillover index and find that this new predictor has an impressive in-sample and out-of-sample predictability of aggregate stock returns. A one-standard-deviation increase in this index leads to a 4.14% increase in the expected excess return over the next month. Furthermore, a mean-variance investor can realize sizable economic gains by using this spillover index in his/her asset allocation. The forecasting power of the spillover index remains significant after controlling for popular economic variables and newly proposed predictors. Due to the absence of learning, the spillover index shows increasing predictive ability over the recent period. The economic origins of the spillover index's success stem from both the cash flow and discount rate channels, as well as significant association with investor sentiment and tail risk. The return predictability of this index is pervasive across characteristic-sorted portfolios and is particularly strong for large-cap or difficult-to-value stocks. [ABSTRACT FROM AUTHOR]

Poplar has gained popularity among farmers of Punjab, Haryana, Western Uttar Pradesh, and the foothills of Uttarakhand and Himachal Pradesh due to their fast growth rate and suitability for industrial uses such as pulp and timber production. Integrating poplar trees into agroforestry systems optimizes land resources and economic gains, as successful techniques have been developed to coordinate crop timing and arrangements effectively. Integrating poplar trees with agricultural crops provides additional income streams for farmers and contributes to soil conservation, biodiversity enhancement, and other environmental benefits. Farmers in these regions typically employ effective spacing of 5 m×4 m for block plantation and 1 m×3 m for row plantation. In the present study, a systematic literature review encompassing 137 English-language journal articles was conducted to assess the economic benefits of Poplar using discounted cash flow (DCF) analysis, considering short-rotation poplar (SRC) and very short-rotation poplar (vSRC) plantations alongside annual crops. The findings revealed that increasing canopy density led to a decline in crop yields by 37%, 70%, and 99% at canopy densities of 30%, 60%, and 90%, respectively, from early spring to harvest. Cost-benefit analysis in Saharanpur district, India, indicated average annual net returns of USD 346.36 for Poplar-based agrisilviculture, while monoculture yielded USD 140.73 per annum. Furthermore, economic analysis in Yamunanagar and Haridwar districts showed benefit-cost ratios ranging from 2.35 to 3.7. Additionally, Poplar block and boundary plantations were found to sequester significantly more carbon in long-lived biomass, serving as substitutes for fossil fuels (5.45 and 1.84 t ha–1 yr–1) in poplar-based systems with block and boundary plantations. The study suggested expanding spacing between tree rows may mitigate resource competition between plantations and crops. The study inferred that Poplar-based agroforestry may play a crucial role in climate mitigation programs by effectively sequestering atmospheric carbon and offering fuel, fodder, timber, and wood products, thereby alleviating pressure on existing natural forests. [ABSTRACT FROM AUTHOR]

Purpose: The primary purpose of this Practice Briefing is to examine the implications of the recommendations of the Royal Institution of Chartered Surveyors (RICS) Review of Investment Valuations to shift towards (explicit) discounted cash flow (DCF) valuations on valuers, clients, risk management and market data. Design/methodology/approach: This Practice Briefing will develop a conceptual framework to articulate the impact of the shift towards explicit modelling assumptions in valuations. A comparative analysis is conducted to contrast traditional valuation approaches with an explicit DCF approach. Findings: The proposed shift to DCF valuations in the real estate industry carries both subtle and profound implications. While on the surface, the move appears to bring minimal change since current valuations are already DCF-based, a deeper exploration reveals a potential transformation to the understanding, analysis and measurement of pricing and risks in commercial real estate. Practical implications: The traditional techniques adopted in valuations have become pervasive in the industry, hindering more sophisticated modelling and analysis of individual assets and portfolios. Explicitly modelling assumptions in both the initial years of cash flow and perpetuity calculations would unveil fundamental relationships and rationales that have previously been buried within, and perhaps ignored by, an All Risks Yield (ARY). Originality/value: This briefing identifies the cause of confusion when interpreting ARY differentials on implied target returns and risk and demonstrates how a change to explicit assumptions, such as growth and letting periods, would enhance transparency, enabling more informed client–valuer discussions, which in-turn will boost confidence in valuation accuracy, lead to more sophisticated asset modelling, market data, forecasting and market analysis. [ABSTRACT FROM AUTHOR]

Time variation in the discount rate affects investment and employment decisions in a manner consistent with Q -theory predictions. This evidence is uncovered when using cyclical consumption as a proxy for the discount rate. The results, which are consistent across both U.S. and international data, suggest that firms respond rationally to variations in the cost of capital and that the discount rate has a substantial impact on macroeconomic dynamics and hence business cycle fluctuations. [ABSTRACT FROM AUTHOR]

Objective: Barriers can be an effective method for reducing escapement of reservoir sport fish; however, whether the financial benefits of a barrier outweigh the costs of a barrier is unknown. We sought to quantify the costs and benefits associated with constructing barriers to reduce fish escapement while explicitly accounting for variability and uncertainty. Methods: We developed a framework using simulation modeling and discounted cash flow techniques to quantify the costs and benefits of barrier construction on Brushy Creek Lake, Iowa, where a barrier was constructed in 2020 to reduce escapement of stocked Walleye Sander vitreus and Muskellunge Esox masquinongy. We then incorporated this framework into an interactive Shiny application to enable cost–benefit evaluations across a wide range of barrier types, system types, species, and escapement rates. Result: The present value of the parallel‐bar barrier on Brushy Creek Lake, Iowa, over 10 years was US$69,576 (range = $64,484–$73,976), whereas the present value of escaped fish was $316,416 ($253,459–$378,823), indicating a net benefit of $246,840 ($188,975–$304,847) associated with barrier construction. The benefit–cost ratio of barrier construction was 4.55 after 10 years, indicating that for every $1 in present value spent on barrier construction, we saved $4.55 by preventing fish escapement. There was a 99% probability of a positive mean net benefit of the barrier after 3 years. Conclusion: Our results indicate that barriers can be a cost‐effective option to minimize fish escapement, and barrier costs are more predictable compared with the cost of escapement. Quantifying the value of escaped fish and barrier construction on an economic scale enables the use of formal decision‐making tools to address complicated and multifaceted issues associated with reservoir fisheries management. Impact statementWe developed a framework to enable the costs and benefits of barrier construction to minimize reservoir sport fish escapement to be quantified on an economic scale and subsequently applied this framework to a barrier construction project in Iowa. We then integrated this framework into a flexible application to enable the costs and benefits of barrier construction to be assessed across a variety of systems. [ABSTRACT FROM AUTHOR]

In decision analysis, expected utility of discounted cash flows is the traditional approach to incorporate risk aversion into the evaluation of a project. The choice of discount rate as well as the convergence with the beta-adjusted approach from finance have always been in question. To address this gap, we adopt a risk-sharing setup in which investors have both treasuries and the stock market as alternatives to the project. For a full utility analysis of all the investor's capital, we provide a unique discount rate that allows setting the horizon at the termination of the project. For a traditional analyst who conducts expected utility of discounted cash flows and ignores the capital not allocated to the project, we recommend an adjusted discount rate that compensates for double-counting the systematic risk. [ABSTRACT FROM AUTHOR]

The U.S. Inflation Reduction Act (IRA) of 2022 provides a wide array of tax credits and other incentives for low-carbon energy. The technology-neutral clean generation production tax credit (PTC) (Section 45Y of the U.S. Internal Revenue Code) and the technology-neutral investment tax credit (ITC) (Section 48E) lower the net cost of new electricity generation projects with zero or negative greenhouse gas emission rates. We evaluate the impact of the IRA legislation--specifically the PTC and ITC--on the cost-competitiveness of small modular reactors (SMRs). We use the Argonne Low-carbon Energy Analysis Framework (A-LEAF) model to calculate the capacity factor of an SMR with a range of hypothetical variable operating and maintenance (O&M) costs in the Electric Reliability Council of Texas (ERCOT) electricity market. We selected ERCOT for market modeling because of its competitive structure, available data, and extensive use in prior literature. We use a discounted cash flow model to calculate the SMR's net present value based on the market prices and capacity factors from A-LEAF, hypothetical ranges of capital and variable O&M costs, and other input parameters, with or without the IRA tax credits. We determine the SMR owner's optimal choice of PTC or ITC for the hypothetical ranges of capital and variable O&M costs. We also evaluate potential shifts in the SMR owner's optimal choice of PTC or ITC based on historical patterns of nuclear capital cost overruns in the United States. We also assess the sensitivity of our results to longer PTC period and electricity prices from the New England market, which tend to be higher than electricity prices in ERCOT. We find that even with the IRA tax credits, only SMRs with low capital and variable O&M costs would be economically feasible in the low-price ERCOT market scenario modeled. A longer PTC period and higher-price market such as New England, however, would significantly expand the economic feasibility of SMRs in the United States. [ABSTRACT FROM AUTHOR]

Resource Constraint Project Scheduling Problems with Discounted Cash Flows (RCPSPDC) focuses on maximizing the net present value by summing the discounted cash flows of project activities. An extension of this problem is the Payment at Event Occurrences (PEO) scheme, where the client makes multiple payments to the contractor upon completion of predefined activities, with additional final settlement at project completion. Numerous approximation methods such as metaheuristics have been proposed to solve this NP-hard problem. However, these methods suffer from parameter control and/or the computational cost of correcting infeasible solutions. Alternatively, approximate dynamic programming (ADP) sequentially generates a schedule based on strategies computed via Monte Carlo (MC) simulations. This saves the computations required for solution corrections, but its performance is highly dependent on its strategy. In this study, we propose the hybridization of ADP with three different metaheuristics to take advantage of their combined strengths, resulting in six different models. The Estimation of Distribution Algorithm (EDA) and Ant Colony Optimization (ACO) were used to recommend policies for ADP. A Discrete cCuckoo Search (DCS) further improved the schedules generated by ADP. Our experimental analysis performed on the j30, j60, and j90 datasets of PSPLIB has shown that ADP–DCS is better than ADP alone. Implementing the EDA and ACO as prioritization strategies for Monte Carlo simulations greatly improved the solutions with high statistical significance. In addition, models with the EDA showed better performance than those with ACO and random priority, especially when the number of events increased. [ABSTRACT FROM AUTHOR]

To date, despite the existence of the sustainability goals of the 2030 Agenda and the need for an energy transition, the results set is still quite far away from being achieved. The awareness of this situation moves many European countries to promote policies based on the use of renewable sources. This paper is aimed at illustrating the Italian legislative context, evaluating the effectiveness of the introduced incentives, according to parameters that affect the productivity of a photovoltaic system. It is also aimed at helping to bridge the gap linked to the relationship between incentives and energy transition, also with regard to renewables. The research focuses on an evaluation methodology, based on technical and economic standards and it is accompanied by a case-study. In order to analyze the productivity of the photovoltaic system, all the main input factors that could affect the technical and economic performance of the system were investigated. In particular, solar potential analysis, shading elements, installation place, azimuth, tilt of modules and technology. For the economic valuations, the discounted cash flow method was used. The results obtained show that some Italian regions, particularly those in the north, should prefer other forms of renewables, such as hydroelectric and geothermal, and that the FER1 decree is not suitable for the promotion of solar photovoltaics in some areas. The research shows also that policies on renewables should be calibrated according to the intrinsic features of the place where they are located and have to be related to the built heritage they will interface, in the light of technological and plant system aspects. [ABSTRACT FROM AUTHOR]

Around 65% of the mitigation needed for the targeted net-zero carbon aviation emissions in 2050 is expected to come from Sustainable Aviation Fuels (SAFs). In this study, an alternative gasification-driven Biomass-to-Liquid (BtL) concept for the production of SAFs is introduced and evaluated. In particular, a fuel synthesis scheme based on the double-stage fermentation of the produced syngas (syngas → acetic acid → TAGs) is assessed instead of the conventional Fischer-Tropsch (FT) or Alcohol-to-Jet (AtJ) synthesis. The objective of the present work is the techno-economic evaluation of a large-scale (200 MWth) replication of the mentioned BtL concept, whose performance has been simulated in Aspen PlusTM (V.11) with reasonable upscaling considerations and models validated at a pilot scale. The estimated baseline Total Capital Investment (TCI) of €577 million lies in the typical range of €500–700 million that many recent techno-economic studies adopt for gasification-driven BtL plants of similar capacity, while the estimated annual operating costs of €50 million correspond to a 15–40% OpEx reduction compared to such plants. A discounted cash flow analysis was carried out, and a baseline Minimum Jet Selling Price (MJSP) equal to 1.83 €/L was calculated, while a range of 1.38–2.27 €/L emerged from the sensitivity analysis. This study sets the biological conversion of gasification-derived syngas into triglycerides (TAGs) as a promising alternative route for the production of SAFs. In general, gasification-driven BtL pathways, led by the relatively mature FT and AtJ technologies, are capable of thriving in the coming years based on their capability of advanced feedstock flexibility. [ABSTRACT FROM AUTHOR]

Global blueberry production more than doubled during the last decade. In Mexico, the production of this fruit has grown faster than globally, positioning this country among the top five international blueberry-producing regions. This case study focuses on a prospective investor planning to grow blueberries in Mexico and export most production to the U.S., the largest producer and consumer of fresh blueberries. A high-technology producer growing blueberries under high tunnels in western Mexico is featured in this article. The case study was researched using a combination of field visits to blueberry producers, collaborative work with an industry consultant, and academic research. The article provides industry statistics on blueberries in Mexico and globally over the last decade. In addition, it describes how the authors conceptualized and developed discounted cash flow models to evaluate this potential investment. Despite the importance of blueberries from Mexico, there is a need for financial models to assess the profitability and risk of growing blueberries in that country. Students solving this case are expected to identify risks and opportunities in the industry and conduct Porter's five forces competitive analysis. In addition, students will mainly evaluate the results of a stochastic capital budgeting model. [ABSTRACT FROM AUTHOR]

Real estate developers typically assess potential projects using feasibility analyses and industry-standard heuristics, which include capital costs, return on costs, and a subjective risk measure. This study explores real estate developers' decision-making practices in selecting hurdle rates and common feasibility analysis techniques, surveying 225 Australian and New Zealand developers. The main findings are that most developers use specific 'go/no-go' hurdle rate mechanisms irrespective of primary real estate type, with the majority using margin on development cost (MDC) or internal rate of return (IRR); the boundaries between traditional speculative development and real estate investment through the use of securitization methods have become blurred; many developers use both quantitative metrics, with qualitative methods and specific structural checks to manage the risks involved; and the two most frequent methods of determining site value prior to acquisition are the residual land value and discounted cash flow methods. Most place a heavy reliance on industry-accepted heuristics and do not have a predetermined process and method for altering or adapting the chosen hurdle rates and benchmarks. This research provides a contribution to property development practice from the Antipodean perspective which until now has been more focused on the UK view, enabling more generalized application internationally. [ABSTRACT FROM AUTHOR]

Recent international arbitration cases, especially P&ID v Nigeria , have highlighted how easy it is for claimants—whether in treaty-based Investor–State Dispute Settlement or commercial arbitration—to advance immense claims grounded on essentially no evidence against state respondents. This largely reflects the readiness of many quantum experts to engage in the practice which Martin Wachs called 'lying with numbers' in order to misrepresent the execution risks of speculative unbuilt projects in a manner that is radically at odds with empirical data regarding such execution risks, which is exacerbated by the ignorance of many arbitrators about business economics and discounted cash flow valuation. This situation is unlikely to improve, and overall standards of candour in valuation in international arbitration will keep going down as the system will keep rewarding the act of cloaking advocacy in the guise of scientific or technical rationality in order to 'lie with numbers'. [ABSTRACT FROM AUTHOR]

In hillside watersheds, forests play a crucial role in protecting against soil erosion. Not only does forest vegetation cover serve as a biological measure to prevent soil erosion, it also generates income through sustainable management practices. However, there is a scarcity of research that evaluates and compares the profitability of perennial woody crops with that of other agricultural crops by integrating biological aspects within an economic analytical framework in Central Madagascar. In this study, we address this gap by combining a biological growth model that captures complex forest dynamics with economic management data to utilize the discounted cash flow method. We applied this approach to evaluate and compare the profitability of forest management and agricultural crop production in the hillside watershed areas of Central Madagascar, which have experienced severe humaninduced soil erosion. Although our results showed that timber production is a profitable option, other agricultural crops generate much higher profits, indicating that financial subsidies alone may not be enough to shift land use toward perennial woody crops. In addition, growing fruit trees such as oranges and mangoes appears to be a much more financially attractive option for local farmers than annual agricultural crop production. [ABSTRACT FROM AUTHOR]

Several life contingency agreements are based on the assumption that policyholders have impaired life expectancy attributable to factors, such as lifestyle, social class, or preexisting health issues. Quantifying two crucial variables, augmented death probabilities and the discount rate of projected cash flows, is essential for pricing such agreements. Information regarding the correct values of these parameters is subject to vagueness and imprecision, which further intensifies if impairments must be considered. This study proposes modelling mortality and interest rates using a generalization of fuzzy numbers (FNs), known as intuitionistic fuzzy numbers (IFNs). Consequently, this paper extends the literature on life contingency pricing with fuzzy parameters, where uncertainty in variables, such as interest rates and death probabilities, is modelled using FNs. While FNs introduce epistemic uncertainty, the use of IFNs adds bipolarity to the analysis by incorporating both positive and negative information regarding actuarial variables. Our analysis focuses on two agreements involving policyholders with impaired life expectancies: determining the annuity payment in a substandard annuity and pricing a life settlement over a whole life insurance policy. In particular, we emphasize modelling interest rates and survival probabilities using triangular intuitionistic fuzzy numbers (TIFNs) owing to their ease of interpretation and implementation. [ABSTRACT FROM AUTHOR]

Copyright of Valori e Valutazioni is the property of Societa Italiana di Estimo e Valutazione (SIEV) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

According to its advocates, integrated reporting (IR) aims to enhance firms' information environment by placing financial reporting into a much broader perspective in which interrelated non‐financial information of firms' activities are taken into consideration. We examine whether this intended outcome of IR embeds into the stock pricing process using a sample of South African listed firms that mandatorily adopted IR in 2011. Unlike previous studies that explore market valuation implications of IR, we examine the channel through which the IR‐related information flows into firm value. Specifically, we quantify the effects of revisions of expectation about future cash flows (prompted by financial reporting information), revisions of expectation about discount rates (prompted by non‐financial reporting information) and their interconnectedness. We hypothesize and empirically show that the adoption of an IR approach prompted greater market revisions of expectations about future discount rates and a stronger interconnectedness between market revisions of expectations about future cash flows and discount rates. Thus, the change in the stock pricing process after the adoption of IR is determined by non‐financial reporting information and its strong interconnectedness with financial reporting information. We also show that our results are stronger for firms with greater earnings opacity, suggesting that investors find IR more useful when firms' financial reporting is opaque. Results indicate to researchers, practitioners and regulators that IR enhances the firm‐level information environment by providing informative non‐financial reporting which is also well integrated with financial reporting. [ABSTRACT FROM AUTHOR]

Copyright of Revista Foco (Interdisciplinary Studies Journal) is the property of Revista Foco and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Transport Trade Services (TTS) Group is the leading company that offers integrated logistics services on the Danube in Romania. The paper provides a pertinent image of the company, outlining several financial analysis indicators for the 2018-2022 period. The Discounted Cash Flow model and sensitivity analysis are two methods used to assess the intrinsic value of the company's stock price, the valuation resulting in a target price of 35.7 RON and a current price of 26.85 RON. With its listing on the Bucharest Stock Exchange, the company has experienced rapid growth and a sound financial health. TTS exhibits positive long-term prospects, consolidated through its increasing profitability and sustainable practices and projects. [ABSTRACT FROM AUTHOR]

In hillside watersheds, forests play a crucial role in protecting against soil erosion. Not only does forest vegetation cover serve as a biological measure to prevent soil erosion, it also generates income through sustainable management practices. However, there is a scarcity of research that evaluates and compares the profitability of perennial woody crops with that of other agricultural crops by integrating biological aspects within an economic analytical framework in Central Madagascar. In this study, we address this gap by combining a biological growth model that captures complex forest dynamics with economic management data to utilize the discounted cash flow method. We applied this approach to evaluate and compare the profitability of forest management and agricultural crop production in the hillside watershed areas of Central Madagascar, which have experienced severe human-induced soil erosion. Although our results showed that timber production is a profitable option, other agricultural crops generate much higher profits, indicating that financial subsidies alone may not be enough to shift land use toward perennial woody crops. In addition, growing fruit trees such as oranges and mangoes appears to be a much more financially attractive option for local farmers than annual agricultural crop production.

What is the link between stock returns and news about economic growth? Using consensus forecasts from the Philadelphia Fed's Survey of Professional Forecasters, I find that the univariate association between stock returns and gross domestic product (GDP) growth forecast surprises is indistinguishable from zero. Although consistent with prior macro-finance research, this phenomenon is intriguing if one believes that the stock market should move in sync with the economy. I consider two non–mutually exclusive hypotheses for this puzzling phenomenon. The first hypothesis is that GDP growth forecast surprises are correlated with offsetting cash flow news and discount rate news. The second hypothesis is that GDP growth forecast surprises measure news about economic growth with noise. I extract a measure of market-level discount rate news using accounting data and find evidence consistent with the hypothesis of offsetting value-relevant news. Overall, this article makes an important step toward resolving evidence of a disconnect between stock market returns and news about economic growth. More broadly, this article illustrates how accounting constructs and methods can be applied to inform macro-finance questions. [ABSTRACT FROM AUTHOR]

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The article presents a comparison of the profitability of entering a photovoltaic investment from a private inverter and an entrepreneur point of view. The analysis was presented in the light of the amendment to the RES Act in 2021 and has been obligatory since April 1, 2022 in Poland. Factors that significantly affect the assessment of investment profitability are given. In the article, the authors presented the legitimacy of entering into such an investment depending on the level of self-consumption of electricity, support mechanisms guaranteed by the legislator and the level of energy demand in a household or in a company. The profitability comparison was carried out using the DCF (discounted cash flow) method, which allows for the market calculation of the investment value with the assumed boundary criteria. Also, using the IRR (internal rate of return) method, a comparison of the economic efficiency of the investment in relation to the alternative management of capital in treasury bonds was presented. [ABSTRACT FROM AUTHOR]

In this study, the use of financial option pricing models in the evaluation of investment projects is examined under the picture fuzzy environment. Especially in projects where uncertainty and risk are high, the traditional discounted cash flow approach gives poor results. The real option approach, which considers uncertainty, can be used effectively in such investment projects. By examining the similarities between a financial option and an investment project, the economic value of the investment project, which is expressed as a call option, is calculated within the framework of the picture fuzzy Black-Scholes option pricing model. Finally, the way and to what extent the calculated project value will be affected by the discount rate and the changes in risk are examined with the help of sensitivity analysis. [ABSTRACT FROM AUTHOR]

We empirically test the prediction of Pástor et al. (2021) that green firms outperform brown firms when concerns about climate change increase unexpectedly, using data for S&P 500 companies from January 2010 to June 2018. To capture unexpected increases in climate change concerns, we construct a daily Media Climate Change Concerns index using news about climate change published by major U.S. newspapers and newswires. We find that on days with an unexpected increase in climate change concerns, the green firms' stock prices tend to increase, whereas brown firms' prices decrease. Furthermore, using topic modeling, we conclude that this effect holds for concerns about both transition and physical climate change risk. Finally, we decompose returns into cash flow and discount rate news components and find that an unexpected increase in climate change concerns is associated with an increase (decrease) in the discount rate of brown (green) firms. This paper was accepted by George Serafeim, Special Section of Management Science on Business and Climate Change. Funding: This work was supported by the National Bank of Belgium, Research Foundation Flanders (FWO), Institut de Valorisation des Données (IVADO), the Natural Sciences and Engineering Research Council of Canada [Grant RGPIN-2022-03767], and Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung [Grants 179281, 191730]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4636. [ABSTRACT FROM AUTHOR]

We investigate the importance of bankruptcy risk in discounted cash flow (DCF) equity valuation. Our analyses first show how bankruptcy risk is incorporated in DCF valuation, where investment risk is captured by cash flow certainty equivalents. Within this general setting, we find that bankruptcy risk can be captured by discounting factors incorporating period-specific bankruptcy probabilities, allowing the numerators in a DCF valuation model to follow a binary random walk. Elaborating a model of this kind, we assess the value of the equity holders' limited liability right (the equity holders' right to hand over the firm to its creditors if bankruptcy occurs). Two valuation models commonly used in academic research and professional practice—the Dividend Discount Model (DDM) and the Residual Income Valuation (RIV) model—are addressed specifically. Our analyses show that bankruptcy probabilities are important for the estimation of the value drivers in both models. Even if bankruptcy probabilities are as low as 0.02, equity values might be severely exaggerated if bankruptcy risk is ignored in DDM or RIV. In particular, this holds for firms expected to have high future growth (conditioned on firm survival). For the RIV model to properly capture bankruptcy risk, we identify "bankruptcy event accounting principles" and an additional term that must be included in the model. We also show that bankruptcy risk under certain conditions can be handled through a specific calibration of the discounting rate/-s in all DCF models, allowing the value drivers—i.e., future dividends or residual income—to be forecasted conditioned on firm survival. [ABSTRACT FROM AUTHOR]

PT XYZ is a State-Owned Enterprise (BUMN) engaged in information and communication technology (ICT) services and telecommunications networks in Indonesia. The projection of increasing internet needs makes internet bandwidth even greater. The sea cable communication system (SKKL) available today is predicted to no longer be able to accommodate bandwidth needs, especially the internet, for the next few years. In addition, PT XYZ must also be able to anticipate serving the Metaverse. This study aims to determine alternative scenarios and the feasibility of building Indonesia's sea cable communication system (SKKL) in the metaverse era. This study discusses the selection of the best scenario from 4 scenarios with the discounted cash flow method and considers the EUAC of each scenario. The aspects to be studied are market, technical, and financial aspects. Market aspect data is obtained from the company's historical data, and demand forecasting is carried out using the linear regression method. The technical aspect is carried out by determining the business process, the scenario to be used, labor, and the details of investment costs. The financial aspect is done by calculating estimated revenue, income statement, and cash flow. Based on the results of the feasibility calculation, the NPV value was Rp.32,337,102,145,226, PBP of 3.2 years, and IRR of 44.43% with MARR of 14.8%. This research shows that the selected scenario is feasible to run. [ABSTRACT FROM AUTHOR]

A key goal of structural health monitoring (SHM) systems applied to infrastructure is to improve asset management. SHM systems yield benefits by providing information that allows improved asset management decisions. Often, improvement is measured in monetary terms, whereby lower expenses are sought. The value of information (VoI) is often evaluated through the quantification of the incremental benefit, resulting from the information provided by the SHM system. The VoI can be considered as having two components: value derived from the improved operation of the infrastructure and value derived from increased useful life. This work focuses on the latter source of value in the context of concrete decks in US highway bridges. To estimate the lifecycle extension potential and the connected VoI, we need to simulate bridge deck condition degradation over time to support a discounted cash flow analysis of bridge replacement cost. We accomplish this by utilizing a neural network-based survival analysis combined with Monte Carlo simulation. We present a case study using the developed methods. We have chosen to study the southbound portion of the bridge on the US Highway 202, located in Wayne, NJ. The selected bridge is a representative concrete highway overpass, the type of which there are large numbers in the US. The case study demonstrates the applicability of the methods developed for the general evaluation of the VoI obtained via SHM. The results are encouraging for the widespread use of SHM for lifecycle extension purposes; the potential value in such applications is large. [ABSTRACT FROM AUTHOR]

We analyze the decomposition of the conditional, rather than the unconditional, variance of market returns based on an extension of the standard Campbell–Shiller approach. The relative importance of cash flow and discount rate news in determining the conditional variance of market returns exhibits significant variation over time and relates to economic conditions. The components of the conditional market variance outperform several benchmark variables, including the conditional market variance itself, in forecasting future market returns and realized variance across different horizons. The forecasts based on the conditional market variance components also provide sizable economic benefits compared with benchmark forecasts in an out-of-sample portfolio exercise where a myopic investor allocates her wealth between the market portfolio and a risk-free asset across different holding periods. [ABSTRACT FROM AUTHOR]

The use of renewable energy sources has become strategic in the production of electricity worldwide due to global efforts to increase energy efficiency and achieve a net zero carbon footprint. Hybrid systems can maximize stability and reduce costs by combining multiple energy sources. A conventional metric, such as the levelized cost of energy (LCOE), that is appropriate for assessing the cost-effectiveness of an option may not be appropriate when evaluating the economic feasibility of hybrid systems. This study proposes a stochastic discounted cash flow model (DCF) to assess the economic viability of a hybrid renewable energy system (HRES) in Brazil. The objective is to determine the combinations that will provide the highest 50th percentile internal rate of return (IRR) and the lowest coefficient of variation (CV). Model variables include capital expenditures (CAPEX), operation and maintenance (O&M) costs, sectoral charges, taxes, and long-term energy production metrics. The results demonstrate that the synergies modeled contributed to the higher economic outcomes for the HRES obtained by combining both energy sources rather than opting for a stand-alone configuration. A wind-dominant combination of 60% wind was able to increase the 50th percentile of the IRR, while a solar-dominant combination of 65% solar minimized the CV. [ABSTRACT FROM AUTHOR]

Decisions by states to cancel oil and gas licenses in the transition to net-zero emissions can trigger investment arbitration claims. Given the massive damages that arbitration tribunals can award to investors, investment arbitration is increasingly being criticized as an obstacle to climate change mitigation and the just energy transition. Under the Discounted Cash Flow (DCF) method, tribunals have based their valuation on the expected production volumes during the remaining lifetime of oilfields and forecasts of international oil prices, essentially requiring states to compensate companies at market conditions for all energy left underground. With an increasing number of carbon neutrality pledges at the global level and states' due diligence obligation to reduce emissions, this article argues that tribunals can no longer ignore decarbonization considerations in the application of the DCF method. Damages decisions must instead account for the price, production cost and risk expectations under net-zero pathways. Significant downward adjustments to the estimated future income of hydrocarbon assets can be achieved by using the lower oil price forecasts in net-zero emissions scenarios, instead of current market conditions. Adjusting future cash flow projections and the discount rate to reflect carbon pricing and other climate policy risks can significantly lower the present value of hydrocarbon assets. As arbitration tribunals have so far ignored decarbonization in their oil damages calculations, legal reforms are needed to require the alignment of investor compensation to decarbonization and ensure a just energy transition. [ABSTRACT FROM AUTHOR]