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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]

The only source of revenue for mining is the sale of its reserves. Therefore, a particular quantity of reserves and a specific selling price will generate a certain income. However, these income determinants are very unpredictable. Theoretically, real options (RO) substitute the discounted cash flow (DCF) approach to account for this uncertainty. Generally, RO quantify the uncertainty particularly related to price volatility. However, owing to its mathematical intricacy and application, the utility of RO is minimal. In addition, historical data analysis cannot be applied for spatial uncertainty related to grade uncertainty. Conventional RO approaches, such as the Black–Scholes method and lattice valuation technique, cannot measure a project with multiple uncertainties. In addition, these methods are mathematically complex and not sufficiently flexible for practical adaptation. This study proposes originality on simulation technique called stratified state aggregation (SSA) development that combined price and grade uncertainties in estimating the value of mining projects. For case study, a tin mining project of PT Timah Tbk in Indonesia was undertaken, specifically for short-term mine planning in underwater mining operations at two mining locations. We utilized the historical data natural logarithmic analysis to determine price uncertainty and conditional simulation to evaluate grade uncertainty. Our results indicated that mining uncertainties might be modeled using RO and value-added through SSA can be used to assess multi-uncertainty and multi-stage mining (rainbow option). The SSA decision aligned with the DCF method with improvement in uncertainty assessment. In addition, incorporating management flexibility may aid in alleviating concerns regarding the continuation or termination of a project. [ABSTRACT FROM AUTHOR]

Using textual analysis for a large sample of analyst reports on U.S. firms, we find that analysts are more likely to use a discounted cash flow (DCF) model and to discuss more cash flow and discount rate information for firms with more uncertainty, as measured by earnings quality and firm risks. The market reactions to target price changes based on a DCF model are stronger, particularly for firms with greater valuation uncertainty and when the analysts present more cash flow and discount rate discussions. These results indicate that the analyst valuation process reflects investors' information demand under uncertainty and has a bearing on the informativeness of analyst research. [ABSTRACT FROM AUTHOR]

The objective of our paper is to analyze, how valuation practice deals with inflation especially for the terminal value, and how company value is influenced by assumptions set by practitioners. For that reason, we examine how vulnerable companies could be regarding struggles to pass on inflationary effects to their customers. We analyze the inflation rates assumed for the steady-state (terminal value) by comparing them to different estimators for the inflation rate expected at the valuation date (Survey of Professional Forecasters, inflation rates derived by comparing real and nominal rate of returns, inflation swaps). We quantify the implications of using different inflation rates for future cash flow development, terminal value and the company value at the valuation date, and compare nominal reported values with company values in a (hypothetical) world without inflation. Our sample consists of 263 valuation reports written by German auditors with valuation dates between 2000 to 2021. Most of the reports aim at determining the price per share to compensate minority shareholders during a squeeze-out. Our results question inter alia the preference for a constant company specific inflation rate of around 1% on average, and we quantify a number of value effects. [ABSTRACT FROM AUTHOR]

Turkey has rapidly become one of the top markets for onshore wind energy with a 10 GW onshore wind power installation, a significant accomplishment for the nation. It means that Turkey's wind energy capacity has more than tenfold increase in the last 10 years. Despite the fact that Turkey has no offshore wind farms, research has indicated a significant and untapped energy potential. This work provides a comprehensive techno-economic analysis of the Samandag Offshore Wind Farm (OWF) project in Turkey. To undertake an economic feasibility study under different Feed-in Tariffs (FiT) and discount rates, a discounted cash flow economic model is utilized. This study takes into consideration the economic indicators utilized in decision-making processes from the perspective of an OWF investor. The planned OWF project is shown to be economically viable only provided specific techno-economic prerequisites are satisfied. Samandag City has a lower levelized cost of energy (LCOE), which is roughly $69.97/MWh, according to the findings. However, the findings show that the net present value (NPV) is very sensitive to discount rates and FiT. The goal of this research is to contribute scientifically to the development of offshore wind energy in Turkey. [ABSTRACT FROM AUTHOR]

The degree of uncertainty associated with the value of a company plays a relevant role in valuation analysis. We propose an original and robust methodology for company market valuation, which replaces the traditional point estimate of the conventional Discounted Cash Flow model with a probability distribution of fair values that convey information about both the expected value of the company and its intrinsic uncertainty. Our methodology depends on two main ingredients: an econometric model for company revenues and a set of firm-specific balance sheet relations that are estimated using historical data. We explore the effectiveness and scope of our methodology through a series of statistical exercises on publicly traded U.S. companies. At the firm level, we show that the fair value distribution derived with our methodology constitutes a reliable predictor of the company's future abnormal returns. At the market level, we show that a long-short valuation (LSV) factor, built using buy-sell recommendations based on the fair value distribution, contains information not accessible through the traditional market factors. The LSV factor significantly increases the explanatory and the predictive power of factor models estimated on portfolios and individual stock returns. [ABSTRACT FROM AUTHOR]

This study aims to compare the market value of private firms and publicly listed small and medium-sized firms (SMEs) in alternative stock markets through a private discount approach with estimates of value based on discounted cash flow projections and along with a comparable multiples approach. The valuation methodology applied in this study yielded a final sample that included 232 observations between public and private companies in the Spanish market. To calculate the discount, we apply the different approaches of discounted cash flow and multiples, such as valuation, earnings, book value, and revenue. Our results conclude there is no private discount, instead, the outcomes of this article suggest a premium over public firms for some ratios. The negative private company discounts mean a premium and, on the other hand, some multiples suggest a discount according to the method of valuation. This paper proves private discounts resulted does not have any comparable value within the same country although all firms in Spain use the same currency. We value the discounted cash flows of our forecasts using a discount rate based on the Capital Asset Pricing Model (CAPM), so our study can also be viewed as a test sensitivity of CAPM-based approaches to equity risk premium, terminal value, and growth rate. Furthermore, we compare historical transaction multiples of privately held companies with transaction multiples of similar publicly held firms. [ABSTRACT FROM AUTHOR]

This study aims to determine the most appropriate alternative fuel technology to comply with possible different imposed emission regulations while ensuring optimal business performance. In this context, the most suitable alternative fuel technology minimizes the required freight rate while maximizing overall performance on technological, environmental, and other criteria. A decision support tool was developed combining the overall performance of alternative fuels based on technological, environmental, and other criteria via a simple multiattribute rating technique model with a financial model based on discounted cash flow analysis. In this model, also an optimization model is implemented to minimize the required freight rate by optimizing for economic vessel speed. This model provides quantified insights into the financial and operational effects of transitioning via either a 'market-based measure' regulatory scenario or an 'emission cap' scenario if current fuels do not reach the zero-emission targets in the future. Based on the analysis, it can be concluded that upgraded bio-oil, Fischer–Tropsch diesel and liquefied bio-methane can be considered the 'most promising' alternative maritime fuels of the future. Current fuels such as Heavy fuel oil and Liquified natural gas remain the 'most probable' to retain dominance without regulations. If there is a transition toward these alternative fuels, this will also lead to a shift toward lower sailing speeds. [ABSTRACT FROM AUTHOR]

Regulation of Next Generation Access Networks (NGANs) has been one of the most debated topics throughout the European Union (EU). Now it seems to be seeking to strike a new balance, between promoting NGANs investments and, simultaneously, preserving the current level of competition. This much-sought reconciliation was attempted with the release of European Commission (EC)'s Recommendation 2013/466/EU on consistent non-discrimination obligations and costing methodologies for the promotion of competition and the enhancement of the broadband investment environment. The Recommendation, among others, defines the use of Economic Replicability Tests (ERTs), on the basis of a Discounted Cash Flow (DCF) approach, as the proper methodological tool to determine whether the dominant firm (i.e., incumbent operator) engages in a discriminatory behavior. The aim of this paper is twofold; first to investigate the impact of long-term access pricing agreements on ERT conduct as defined in Recommendation 2013/466/EU; second, in the light of the review of the aforementioned Recommendation, to attempt a non-conventional implementation of the test. The latter manifests itself via the potential use of Real Options Theory (ROT) within the ERT formulation on top of DCF results. The main objective is to investigate whether the fixed part of the wholesale access price - if the latter is seen as a two-part tariff - can actually be included in the calculation process to the contrary of what Jaunaux and Lebourges [39] suggest. [ABSTRACT FROM AUTHOR]

The global market uptake of the fourth generation-Long-Term Evolution (4G-LTE) Mobile Broadband (MoBro) services are steadily rising, leading to higher capital investments by mobile network operators (MNOs) to scale-up their infrastructure for meeting the impending demand for MoBro data the world over. However, MNOs face uncertainties about financial returns from such investments, owing to a host of technological and market-related factors, which impact the enablement of such 4G-LTE MoBro services. These challenges are clearly evident in the Indian market. Firstly, 4G-LTE subscribers in the rural India contribute to less than one-third of the overall market size. Secondly, India performs poorly in terms of minimum capacity requirements of the 4G-LTE MoBro services. Thirdly, the rise in per-user consumption of MoBro data does not translate into a similar rise in the MNOs' revenue. Fourthly, the socio-economic-geographic segregation of India into twenty-two administrative zones (referred to as telecom circles) add to the complexities in the capital investment decisions of MNOs. To address the above challenges, we model various cost and profitability scenarios of a hypothetical MNO providing universal 4G-LTE deployment across the twenty-two telecom circles in India using the available spectrum bands. Our proposed model is firmly established in the "network investment economics" framework for telecom innovations. We adopt a technology diffusion-based approach to forecast the 4G-LTE subscribers in India. We focus on the requirements of 4G-LTE MoBro infrastructure investments, including the spectrum selection decisions by MNOs, and show that, for valuation of the spectrum, the policymakers in India need to take into account the potential of the spectrum in terms of financial returns to an MNO deploying 4G-LTE using that spectrum, as against merely valuing the spectrum based on primarily the technical characteristics of its carrier frequency and benchmarks of prior spectrum auction prices in a particular telecom circle. Finally, we also show that a nationwide 4G-LTE network, which is universal, inclusive, and adhering to the global standards in terms of service quality, can be financially lucrative for MNOs, if enabled by appropriate policies instituting collaborative frameworks for infrastructure sharing, and price rationalization of spectrum bands across the twenty-two telecom circles. [ABSTRACT FROM AUTHOR]

The societal demand for biomethane production by anaerobic digestion of waste and biomass is rapidly growing to build a circular economy, yet actual efficiency is limited. Biochar addition has been technically shown to enhance methane yields in general, but economics are unknown so far. Here, we evaluated the profitability of adding biochar into orange peel waste using the method of the discounted cash flow. We also studied biochar prices and incentives for biomethane production. Results indicate that adding biochar decreases 17 times the overall economy of the process. This decline is explained by high current prices of biochar. To reach profitability, subsidies should be higher than 20 Eur per MWh of biomethane. [ABSTRACT FROM AUTHOR]

Risk is a significant phenomenon in mineral industries due to several associated social, environmental, technical, and financial uncertainties. Risk assessment is a standard procedure that evaluates the effects of uncertainties on a mining project. To deal with technical and financial uncertainties, the most well-known risk assessment technique is the Monte Carlo simulation (MCS), which requires reproducing correlations between uncertain variables. Correlation does not imply causation, but it does provide information regarding how uncertain variables interact. Given that samples generated in MCS are used in a transfer function (e.g., to produce net present value), transfer function values may mislead risk assessors if the interactions are not reproduced. This study uses historical reference data to compare MCS outcomes based on Pearson and copula correlations with regard to their ability to reproduce interactions. Furthermore, results from a case study on a gold mining project—including gold price, production cost, grade, and recovery as well as interest rate as uncertain parameters—show that if the associations between the variables are non-linear, copulas capture interactions and correlations more accurately than Pearson. [ABSTRACT FROM AUTHOR]

The Campbell and Vuolteenaho (Am Econ Rev 94(5):1249–1275, 2004) two–beta model decomposes the systematic risk in the sensitivity of cash flow and discount rate change. We employed this model, which we call the Two Beta Decomposition Model (TBDM) and found that this model is useful to compute the cost of capital for unlisted companies (UCs) via a proxy from listed companies. This model includes not only the accounting return reaction to long-term changes in consumption, but also links fundamental reactions to temporal changes in risk aversion. We test this model along with three traditional alternatives that are potentially useful in computing the cost of equity for UCs: accounting betas (AB), unlevered betas (UB), and operational betas (OB). Our results show that AB, UB and TBDM can partially explain the cross-sectional variations of stock returns. Additionally, using a series of non-parametric ranking test along with several statistics of goodness of fit, we found that the TBDM is the model that produces the best fit among competing models followed by the UB which is currently the most used among proxy methods. [ABSTRACT FROM AUTHOR]

Purpose: The environmental and economic impacts of livestock production systems are typically assessed using global characterisation factors and data, even though several impact categories call for site-specific assessments. Here, we account for spatial variability by addressing potential interactions between geographic locality and the cost-effectiveness of farm investments that aim to reduce system environmental impact, using Danish pig production as a case-in-point. Methods: An LCA-based, spatially explicit environmental abatement cost framework was developed to assess the cost-effectiveness of potential environmental abatement strategies. The framework was tested for Danish pig production in a "4 manure management × 4 geographic location" scenario analysis design. In addition to the baseline, the alternative manure management strategies were on-farm anaerobic digestion, slurry acidification and screw press slurry separation, implemented in an integrated pig farming system. The geographic locations differed in their proximity to Natura 2000 areas and in pig farming density. Eight different impact categories were assessed through an LCA using spatially explicit characterisation factors whenever possible, and annualised abatement potential was estimated for each manure management scenario and in each geographic location. We also estimated the financial performance for each scenario, through a discounted cash flow analysis at a whole-farm level. Results and discussion: We observed significant interactions between geographic location and system environmental and economic performance under baseline conditions. Significant location effects were also observed for the cost-effectiveness of all manure management strategies tested. Anaerobic digestion was the only "win–win" strategy that increased farm profits while reducing system environmental impact in two of the geographic cases: when implemented in a region of high pig farming density located near Natura 2000 and when implemented in a region of high pig farming density located far from Natura 2000 areas. Slurry acidification and slurry separation achieved sizeable abatement potential for impacts on ecosystem quality but incurred large additional costs in all geographic case studies considered, particularly when arable land was limited near the pig farm. Conclusions: Accounting for basic spatial characteristics within an environmental abatement cost framework had significant impact on the cost-effectiveness of on-farm investments for mitigation of system environmental impact. To the best of our knowledge, no studies to date have utilised such spatial characteristics within environmental abatement cost modelling of livestock farming systems. The presented framework has the potential to be further expanded using more detailed spatial, economic and geophysical data, which could ultimately improve decision-making regarding cost-effective investments that aim to improve the sustainability of livestock farming operations. [ABSTRACT FROM AUTHOR]

The circular economy is calling for the rapid use of already-developed renewable energies. However, the successful implementation of those new fuels is limited by economic and political issues. For instance, in the Brandenburg region, Germany, biogas production from anaerobic digestion of biomass and wastes is a current alternative. However, the upgrading biogas to biomethane is still challenging and the economic viability is unknown. Therefore, we performed an economic analysis for biogas upgrading to biomethane in the Brandenburg region. Five biogas plant sizes were analyzed by the method of discounted cash flow. This method yields the net present value of the projects, thus revealing the profitability or non-profitability of the plants. Results indicate profitable outputs for medium and large plants, with net present values between 415 and 7009 k€. However, the smallest plants have net present values from -4250 to -3389 k€, thus needing further economic efforts or subsidies to reach profitability. Indeed, biomethane prices should range between 52.1 and 95.6 €/MWh to make these projects profitable. Combinations of 50% of investment subsidized and 11.5 €/MWh feed-in tariffs subsidies could make the projects reach profitability. These findings reveal that political actions such as green policies and subsidies are needed to implement green energy. This case study should serve as a potential tool for policy-makers toward a sustainable bioeconomy. [ABSTRACT FROM AUTHOR]

A problem for mining districts, for example those with small to medium operations, is the uncertainty with respect to the valuation of exploration targets. In cases where a mining district has been only partially developed, geological uncertainty likely represents a substantial part of resource valuation risk. To address this problem, we developed a method for valuing exploration targets in the early stage of exploration based on four variables: (1) risks associated with exploration; (2) geological uncertainty; (3) economic potential; and (4) exploration costs. The new method presented offers a simple and replicable means to value mineralized bodies and prioritize mining activities based on quantitative geoscientific information and can additionally be adapted to analyze other exploration projects, such as those located in areas without mining activity. In this work, we studied a series of Cu–Ag and Au veins located in the Tiltil Mining District in the Coastal Cordillera of the Chilean Central Andes. We performed four steps in order to characterize the level of uncertainty in the resource exploration and valuation: (1) we acquired district-level data on the geology in and around Tiltil and the activity of 39 small mining operations; (2) we designed a preliminary conceptual exploration campaign; (3) we applied and adapted a new method for the valuation of mineral resources; and (4) we estimated the economic value of the studied mineral targets. The valuation method uses the product of three mutually independent variables: potential value, exploration risk, and geological uncertainty. The estimated value of minerals, at Tiltil, without discounting cash flows is 50.2 billion CLP, while a discount rate of 15.62% returns an estimate of 26.7 billion CLP. When adjusting these values for the level of geological uncertainty discerned in our method, the resulting values are approximately 56% less. We additionally applied the valuation method to seven potential mining targets, considering both potential exploration resources and inferred resources, and found values ranging from 21.8 billion and 11.8 billion CLP (32.3 million and 17.5 million USD with an exchange rate of 675.48 CLP per USD) without discounting cash flows and with a discount rate of 15.62%. We encourage the use of this new method in the early-stage development of small mining operations in order to characterize correctly potential profitability. [ABSTRACT FROM AUTHOR]

With limited financial resources, decision-makers in firms and governments face the task of selecting the best portfolio of projects to invest in. As the pool of project proposals increases and more realistic constraints are considered, the problem becomes NP-hard. Thus, metaheuristics have been employed for solving large instances of the project portfolio selection problem (PPSP). However, most of the existing works do not account for uncertainty. This paper contributes to close this gap by analyzing a stochastic version of the PPSP: the goal is to maximize the expected net present value of the inversion, while considering random cash flows and discount rates in future periods, as well as a rich set of constraints including the maximum risk allowed. To solve this stochastic PPSP, a simulation-optimization algorithm is introduced. Our approach integrates a variable neighborhood search metaheuristic with Monte Carlo simulation. A series of computational experiments contribute to validate our approach and illustrate how the solutions vary as the level of uncertainty increases. [ABSTRACT FROM AUTHOR]

Providing decision makers and the investment community with transparent methods to value investments in resilience and adaptation measures to protect physical assets from climate change impacts is becoming increasingly critical. To address this need, this paper introduces and utilizes the decoupled net present value (DNPV) valuation methodology. DNPV is a robust method that can incorporate climate change risk into investment analyses. This paper also discusses how the widespread use of traditional valuation methods such as net present value combined with risk-adjusted discount rates introduces a pernicious time bias effect that magnifies stakeholders' misaligned interests and investment horizons, leading investors, both public and private, to significantly underinvest in resilience and adaptation. Furthermore, because traditional valuation methods cannot correlate physical risks (e.g., loss of revenue due to physical damage or lost access to an asset) with discount rates, investments to reduce climate change risks are largely considered as expenses that make the investment less attractive. The DNPV method addresses this issue and offers a viable alternative that can consistently and transparently quantify all risks (market and non-market) in terms of cash flows. This allows investors and stakeholders to quantify in monetary terms the potential exposure of physical assets to climate-related hazards and assess the effect of decisions to invest in resilience and adaptation measures. With the aid of a simple numerical example, the DNPV method is used to illustrate how such actions can be treated as quantifiable risk reduction investment opportunities that result in better investment decisions. [ABSTRACT FROM AUTHOR]

Valuation techniques, such as discounted cash flow and multiples, are applied in transactions and are also relevant for accounting, tax, and litigation issues. Within these and other valuation purposes, the techniques are crucial for "social interactions" like market processes and legal affairs. We examine this "social dimension" of business valuation and look especially at the advancement of valuation knowledge and techniques. For this purpose, we employ an approach based on "actor-network-theory" (ANT). In order to study specific margins of business valuation, the focus lies on the dissemination of the capital asset pricing model (CAPM) in German judicial valuation. We conclude, inter alia, that "the" CAPM has developed into a growing actor-network over the time, a well-established infra-structure which allows other actors to link to it. The CAPM-network deploys specific actors which enable to conduct or implement advantageous actions. In this context we discuss concepts like co-authorities, (vague) labelling, vague referencing and responsibility at a distance. Moreover, we identify specific arguments which are used by courts regarding the application of the CAPM. We suggest that these arguments are particular important to solidify and perpetuate the application of the model in judicial practice. The present study intends to shed light on the process of the construction of valuation techniques, the actors which are involved in this process, and the interactions of these actors. In doing so, we intend to facilitate and objectify the dialogue between actors in business valuation and thus to improve further ambitions to construct valuation techniques. [ABSTRACT FROM AUTHOR]

One of the main barriers to the development of energy efficiency (EE) projects in Brazil is the decision-makers' lack of knowledge about the risks of the projects. The Brazilian Government's Procedures of Energy Efficiency Program (PROPEE) is currently one of the main sources of funding for energy efficiency (EE) projects. The method for evaluating the technical and economic feasibility of projects presented in PROPEE applies the traditional discounted cash flow (DCF) methodology to calculate the net present value (NPV). The energy price used in this model is a fixed value calculated through the postponement of investments (cost of avoided demand) and/or reduction of operating expenses (avoided energy cost). The avoided costs for a given voltage level are incurred throughout the power system, upstream of the consumption unit (view of the electrical system's operator). The PROPEE's methodology, applied on a large scale in Brazil, does not consider some technical uncertainties present in EE projects, nor the market uncertainty regarding the fluctuation of the energy price paid by the consumer units. This paper evaluates the investment risk of EE projects (consumer's perspective) adopted by the Brazilian market, taking as example a large electricity consumer. A methodology is proposed, which, considering the technical and economic uncertainties, performs a more comprehensive and realistic analysis of the complex business scenario involving the EE projects. This case study considered the data collected by a team of independent engineers, for the first time in January 2009 and updated in January 2015, to assess the energy efficiency potential of a commercial consumer unit installed in the city of Rio de Janeiro and connected to the grid of local distribution level voltage 13.8 kV. This study demonstrates a model that made the risk management projects viable in energy efficiency demand-side management (DSM). However, it could also be applied in other markets as well. Understanding how the uncertainties affect decision-making in EE projects is essential for developing a more comprehensive outlook on constructive and regulatory perspective, contributing to the promotion of energy efficiency projects. [ABSTRACT FROM AUTHOR]

Between 1967 and 1971, the Chilean government nationalized its large-scale copper mining industry. While this process is widely considered successful given the demonstrated long-term state capacity to profitably operate the assets, the discussion on its net financial convenience has usually been disregarded. Aiming to improve the understanding of this case of resource nationalism, this paper follows two complementary approaches. First, we provide a systematic review of the historical background, development, and short-term impact of the Chilean nationalization, consolidating at the same time the available financial data on fiscal inflows and outflows as part of this process. Secondly, we perform an ex-post NPV assessment using a 10% discount rate over the annual cash flows that the government has perceived from the nationalized mining operations from 1967 to 2022 and compare it with a hypothetical counterfactual scenario in which these mines would have remained privately owned. This yields a higher NPV of the Nationalization compared to the counterfactual. Considering that discount rates above 11.1% or operational cost reductions by 4.5% indicate a net financial loss, the results suggest that, purely from a financial perspective, the nationalization process was marginally positive for the government. We expect that this analysis provides support for a thoughtful mineral policy that contributes to sustainable human and economic development in resource-rich countries. [ABSTRACT FROM AUTHOR]

However, for valuation purposes, it is not necessary to value individual intangible assets separately (as would be required by IFRS 3) because information on their aggregate value is sufficient in the Czech Republic. Keywords: G30 EN G30 253 255 3 12/28/21 20210801 NES 210801 Intangible assets, including inherent goodwill, form an increasingly significant part of company value. Income-based valuation can be achieved by applying the discounted cash flow (DCF) method based on updated future free cash flows (cash flows available for discretionary spending by shareholders) at the valuation date. [Extracted from the article]

Rainwater harvesting systems (RWHSs) are increasingly employed to reduce the impact of water scarcity in urban buildings. Implementation depends on their financial feasibility, which is generally assessed using discounted cash flow methods. However, these techniques do not consider uncertainties in demand, rainfall, and water tariffs, which can have considerable effects. This work aims to apply real options analysis (ROA)—which evaluates options by establishing ta value for flexibility—to determine the feasibility of RWHSs. A case study incorporating management flexibility was conducted in three university buildings; it showed that uncertainty can present a strategic opportunity based on the possibility of RWHS expansion. The traditional net present value (NPV) and option value were calculated and compared with the result that ROA increased the NPV by more than five times. Thus, it was confirmed that options pricing increases projects' values and presents opportunity gains for investments, especially when NPV without flexibility is close to zero. With ROA, systems that do not appear to have economic returns with conventional analysis may become feasible. Therefore, ROA is expected to replace conventional methods in RWHS investment decisions, as it can incorporate uncertainties, making the systems more economically attractive. [ABSTRACT FROM AUTHOR]

In this paper, we focus on analyzing the relationship between the discounted aggregate claim costs until ruin and ruin-related quantities including the time of ruin. To facilitate the evaluation of quantities of our interest as an approximation to the ones in the continuous case, discrete-time renewal risk model with certain dependent structure between interclaim times and claim amounts is considered. Furthermore, to provide explicit expressions for various moment-based joint probabilities, a fairly general class of distributions, namely the discrete Coxian distribution, is used for the interclaim times. Also, we assume a combination of geometrics claim size with arbitrary interlciam time distribution to derive a nice expression for the Gerber-Shiu type function involving the discounted aggregate claims until ruin. Consequently, the results are applied to evaluate some interesting quantities including the covariance between the discounted aggregate claim costs until ruin and the discounted claim causing ruin given that ruin occurs. [ABSTRACT FROM AUTHOR]

We investigate the number of and reasons for errors and questionable judgments that sell-side equity analysts make in constructing and executing discounted cash flow (DCF) equity valuation models. For a sample of 120 DCF models detailed in reports issued by U.S. brokers in 2012 and 2013, we estimate that analysts make a median of three theory-related and/or execution errors and four questionable economic judgments per DCF. Recalculating analysts' DCFs after correcting for major errors changes analysts' mean valuations and target prices by between −2 and 14 % per error. Based on face-to-face interviews with analysts and those who oversee them, we conclude that analysts' DCF modeling behavior is semi-sophisticated in the sense that analysts genuinely make mistakes regarding certain aspects of correctly valuing equity but also respond rationally to the incentives they face, particularly the reality that they are not directly compensated for being textbook DCF correct. [ABSTRACT FROM AUTHOR]

In this paper, an inventory system with a trade credit policy when payment point is not deterministic in nature is studied for deteriorating items. Under trade credit policies, the retailers have to pay at trade credit point or at a predetermined point. In practice, it is not always possible for a retailer to strictly adhere to the same payment policy every time, may be because of uncertainty of cash in hand at respective time points or for other reasons. The optimal policies are derived by taking the possibility of not making the payment in a single point every time into consideration. Two scenarios of the policies of the supplier's conditions are considered for which retailer may respond in different ways. Three types of retailer's response are considered in this paper. Depending on payment pattern specific to a retailer a probability distribution for the duration of payment delay is incorporated. For all these situations the expected net present value of the total cost is derived and hence optimal policies are determined. These models are illustrated through numerical examples. The sensitivity analysis is carried out with respect to various parameters. The total costs which are optimally obtained give the actual expected cost and hence minimize budgetary variance. [ABSTRACT FROM AUTHOR]

By determining the optimal price threshold of mining activation, this research aims at estimating a mine's in situ value by incorporating its real option value (ROV). The traditional discounted cash flow (DCF) method, the standard tool for economic feasibility studies in mineral industry, can be problematic since it fails to address uncertainties and operational flexibilities (Trigeorgis Adv Futures Options Res 4:S1537164, ; Schwartz J Financ 3:923-973, ; Slade J Environ Econ Manag 41:193-233, ; Abdel Sabour and Dimitrakopoulos J Min Sci 47(2):191-201, ). DCF normally results in under-evaluation when significant price variability is present in commodity prices such as gold, silver, copper, and recently rare earths. A mining project is more valuable in expected value terms if it is activated following an appropriately chosen price threshold. In this work, the commodity price is modeled using a mean-reverting process, which is more relevant to commodity economics than the generally used Geometric Brownian motion process (Pindyck and Rubinfeld ). It is shown that the value of flexibility is significant and peaks when mining cost equals spot price; the exercising price threshold increases as average cost rises and probabilities of exercising the option are estimated. ROV method provides a tractable and realistic scheme to evaluate a mine's in situ value and a strategy to manage mining activities. [ABSTRACT FROM AUTHOR]

Standard discounted cash flow approaches suffer from a rudimental modeling of the possibility of a default, as the main characteristics such as the default probability and potential bankruptcy costs are commonly disregarded. This paper aims at providing a tractable extension of the well-known WACC approach for both default risk and bankruptcy costs. The corrected WACC discount rate reveals that default risk results in a systematically higher WACC because the tax component is scaled by the survivorship probability and an aditional component for bankruptcy costs must be added. This difference between the classical WACC discount rate and the simple modified WACC rate can be remarkable especially for firms from businesses with high bankruptcy costs and a relevant default probability. [ABSTRACT FROM AUTHOR]

In this work discrete-continuous project scheduling problems with discounted cash flows are considered. These problems are characterized by the fact that activities of a project simultaneously require discrete and continuous resources for their execution. A class of these problems is considered, where the number of discrete resources is arbitrary, and there is one continuous, renewable resource, whose total amount available at a time is limited. Activities are non-preemptable, and the processing rate of an activity is a continuous, increasing function of the amount of the continuous resource allotted to the activity at a time. A positive cash flow (cash inflow) is associated with each activity, and the objective is to maximize the net present value (NPV). The discrete-continuous resource-constrained project scheduling problem with discounted cash flows (DCRCPSPDCF) is defined. Four payment models are considered: lump-sum payment at the completion of the project, payments at activity completion times, payments at equal time intervals, and progress payments. Some properties of optimal schedules are proved for two important classes of processing rate functions: all functions not greater than a linear function (including linear and convex functions), and concave processing rate functions. [ABSTRACT FROM AUTHOR]

The Segilola gold mine has been valued in this work to determine its viability using Monte Carlo simulation approach. To achieve this, a base case discounted cash flow (DCF) model was developed for the project from which sensitivity analysis was conducted to determine the value drivers in the project. Using Palisade's @Risk 6.0 software and setting suitable probability distribution function for the value drivers of the project, Monte Carlo simulation was used to calculate the statistical forecast of the project value. The base case DCF analysis gave a negative net present value (NPV) of US$−7.46 million. The sensitivity analysis showed that the input parameters: gold price, gold grade, strip ratio, and operating costs are the value drivers of the project. A mean NPV of US$30.79 million was obtained for the project with a standard deviation of US$58.26 million after running the Monte Carlo simulation. The simulation result also showed that the probability of achieving positive NPV (profit) in the project is 69.2 % and probability of loss of money is 30.8 %. [ABSTRACT FROM AUTHOR]

Healthcare systems are increasingly under pressure to provide funding for innovative technologies. These technologies tend to be characterized by their potential to make valued contributions to patient health in areas of relative unmet need, and have high acquisition costs and uncertainty within the evidence base on their actual impact on health. Decision makers are increasingly interested in linking reimbursement strategies to the degree of uncertainty in the evidence base and, as a result, reimbursement for innovative technologies is frequently linked to some form of patient access or risk-sharing scheme. As the dominant methods of economic evaluation report final outcomes only at the time horizon of the analysis, they present only aggregated information. This omits much of the information available on how net benefit is distributed within the time horizon. In this article, we introduce the Net Benefit Probability Map (NBPM), which maps net health benefit versus time to identify how certain decision makers can be about the benefit of technologies at multiple time points. Using an illustrative example, we show how the NBPM can inform decision makers about how long it will take for innovative technologies to 'pay off', how methodological choices on discount rates affect results and how alternative payment mechanisms can reduce the risk for decision makers facing innovative technologies. [ABSTRACT FROM AUTHOR]

Prior research documents a weak association between the implied cost of equity inferred from analyst forecasts and realized returns. It points to predictable errors in analyst forecasts as a possible cause. We show that removing predictable errors from analyst forecasts leads to a much stronger association between implied cost of equity estimates obtained from adjusted forecasts and realized returns after controlling for cash flow news and discount rate news. An estimate of implied risk premium based on the average of four commonly used methods after making adjustments for predictable errors exhibits strong correlations with future realized returns as well as the lowest measurement error. Overall, our results confirm the validity of implied cost of equity estimates as measures of expected returns. Future research using implied cost of equity should remove predictable errors from implied cost of capital estimates and then average across multiple metrics. [ABSTRACT FROM AUTHOR]

Is there a unique way to de-idealize models? If not, how might the possible ways of reducing the distortion between models and reality differ from each other? Based on an empirical case study conducted in financial markets, this paper discusses how a popular valuation model (the Discounted Cash Flow model) idealizes reality and how the market participants de-idealize it in concrete market situations. In contrast to Cartwright's view that economic models are generally over-constrained, this paper suggests that valuation models are under-constrained. This serves as the reason why the relaxation of simplifying assumptions and concretization do not work as methods of de-idealization. The paper finds that financial market participants de-idealize models using commentary that takes the form of judgment. As a conclusion, a hypothesis is formulated that proposes that the more underdetermined the model is the bigger role narrative and other pragmatic elements play in the process of model application. [ABSTRACT FROM AUTHOR]

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This paper studies the valuation of companies going public and defines a methodology to infer the growth expectations implicit in the prices of their Initial Public Offering (IPO). The proposed reverse-engineered DCF model is operable by individual investors, as it does not require access to private information or sell-side analysts' forecasts. Applying the procedure to a sample of IPOs in three European countries (France, Italy, and Germany), we estimate the cash flow growth implied by offer prices and examine the bias of implied growth in comparison to the realized. We find that the estimated growth in cash flow is much higher than its actual realization, with the median IPO firm overvalued at the offering by 74%. Estimation errors increase with IPO firms' leverage and underpricing, and decrease with age, size, and book-to-market ratios. Further tests find that post-IPO stock returns are lower for issues whose implied growth is more upward biased. [ABSTRACT FROM AUTHOR]

This paper presents an extended inventory model of Huang (J. Oper. Res. Soc. 54, 1011–1015, ), which investigated the retailer’s optimal inventory policy under two levels of trade credit. Herein, we consider the impact of a replenishment policy on the timing of the cash flows associated with payments to suppliers and revenue streams from customers. That is, the same cash amount will possess different money value at different future time. To see this, we adopt the more appropriate net present value (NPV) object instead of the average cost objective. In addition, the deteriorating effects will be incorporated in this inventory model, and the time to deterioration of each item follows an exponential distribution. The discounted cash flow (DCF) approach is used to derive the optimal solution in this study. Furthermore, we first show that the optimal solution not only exists bus also is unique. Then, we provide a theorem to locate the optimal ordering policy. Finally, a numerical example for illustration is provided. [ABSTRACT FROM AUTHOR]

In this paper, we propose a lump-sum payment model for the resource-constrained project scheduling problem, which is a generalization of the job shop scheduling problem. The model assumes that the contractor will receive the profit of each job at a predetermined project due date, while taking into account the time value of money. The contractor will then schedule the jobs with the objective of maximizing his total future net profit value at the due date. This proposed problem is nondeterministic polynomial-time (NP)-hard and mathematically formulated in this paper. Several variable neighborhood search (VNS) algorithms are developed by using insertion move and two-swap to generate various neighborhood structures, and making use of the well-known backward–forward scheduling, a proposed future profit priority rule, or a short-term VNS as the local refinement scheme (D-VNS). Forty-eight 20-job instances were generated using ProGen and optimally solved with ILOG CPLEX. The performances of these algorithms are evaluated based on the optimal schedules of the 48 test instances. Our experimental results indicate that the proposed VNS algorithms frequently obtain optimal solutions in a short computational time. For larger size problems, our experimental results also indicate that the D-VNS with forward direction movement outperforms the other VNS algorithms, as well as a genetic algorithm and a tabu search algorithm. [ABSTRACT FROM AUTHOR]

In tough economic times, growing a business may seem like a daunting prospect. However, it is possible for entities to grow the value of their businesses while navigating a difficult economic period. This article examines the processes used to value a business enterprise and the factors which contribute to an entity's value. It then suggests ways for a publishing company to increase its value. [ABSTRACT FROM AUTHOR]

A farm-level financial feasibility was performed to examine the use of shelterbelts as a swine odor mitigation technology. Shelterbelts are purposefully planted rows of trees and shrubs around the main sources of swine odor—swine buildings, manure storage systems, and crop fields that receive land applied manure. By using a series of model pork finishing farms and a number of differing shelterbelt design scenarios, the shelterbelt establishment and long-term (20 years) maintenance costs were calculated using a discounted cash flow analysis. Total costs for examined pork finishing farms, depending upon the shelterbelt design scenario, and whether or not government cost-share programming was used, ranged from $0.01 to $0.65 per pig produced. Study results emphasized the importance of cost-share programs, particularly Environmental Quality Incentive Program (EQIP). In most cases, both with and without cost-share programming, the total costs were well below reported pork producer expenditures for odor management. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Business Economics / Zeitschrift für Betriebswirtschaft is the property of Springer Nature 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.)

Copyright of Journal of Business Economics / Zeitschrift für Betriebswirtschaft is the property of Springer Nature 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.)

Discounted cash flow, method of comparables, and fundamental analysis typically yield discrepant valuation estimates. Moreover, the valuation estimates typically disagree with market price. Can one form a superior valuation estimate by averaging over the individual estimates, including market price? This article suggests a Bayesian framework for combining two or more estimates into a superior valuation estimate. The framework justifies the common practice of averaging over several estimates to arrive at a final point estimate. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Business Economics / Zeitschrift für Betriebswirtschaft is the property of Springer Nature 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.)

Under the assumption that the asset value follows a phase-type jump-diffusion, we show that the expected discounted penalty satisfies an ODE and obtain a general form for the expected discounted penalty. In particular, if only downward jumps are allowed, we get an explicit formula in terms of the penalty function and jump distribution. On the other hand, if the downward jump distribution is a mixture of exponential distributions (and upward jumps are determined by a general Lévy measure), we obtain closed-form solutions for the expected discounted penalty. As an application, we work out an example in Leland’s structural model with jumps. For earlier and related results, see Gerber and Landry [Insur. Math. Econ. 22:263–276, ], Hilberink and Rogers [Finance Stoch. 6:237–263, ], Asmussen et al. [Stoch. Proc. Appl. 109:79–111, ], and Kyprianou and Surya [Finance Stoch. 11:131–152, ]. [ABSTRACT FROM AUTHOR]

In this paper we study algorithms for pricing of interest rate instruments using recombining tree (scenario lattice) interest models. The price is defined as expected discounted cash flow. If the cash-flow generated by the instrument depends on the full or partial history of interest rates (path-dependent contracts), then pricing algorithms are typically of exponential complexity. We show that for some models, including product form cash-flows, additive cash-flows, delayed cash-flows and limited path-dependent cash-flows, polynomial pricing algorithms exist. [ABSTRACT FROM AUTHOR]

Conditional expected values in Markov chains are solutions to a set of backward differential equations, which may be ordinary or partial depending on the number of relevant state variables. This paper investigates the validity of these differential equations by locating the points of non-smoothness of the state-wise conditional expected values, and it presents a numerical method for computation of such expected values with a controlled global error. Two cases leading to first order partial differential equations in two variables are considered, both from finance and insurance: option pricing in a Markov chain driven financial market, and probability distributions of discounted cash flows generated by multi-state life insurance contracts. [ABSTRACT FROM AUTHOR]

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This paper is concerned with resource-constrained project scheduling problems where cash flows are associated with project activities and the net present value of the project is to be maximized. The temporal constraints between the activities are given by minimum and maximum time lags. First we study the structure of the sets of feasible and optimal schedules for the net present value problem with and without resource constraints. After that we briefly sketch a steepest ascent algorithm for the problem without resource constraints. This algorithm together with a dual variant is used for a branch and-bound procedure for the problem with resource constraints, which is presented next. To solve larger problem instances approximately two truncated branch-and-bound procedures are proposed. An experimental performance analysis shows that the new algorithms outperform the solution methods known so far significantly. [ABSTRACT FROM AUTHOR]

In this paper, the multi-mode resource constrained project scheduling problem with discounted cash flows is considered. The objective is the maximization of the net present value of all cash flows. Time value of money is taken into consideration, and cash in- and out-flows are associated with activities and/or events. The resources can be of renewable, nonrenewable, and doubly constrained resource types. Four payment models are considered: lump sum payment at the terminal event, payments at prespecified event nodes, payments at prespecified time points and progress payments. For finding solutions to problems proposed, a genetic algorithm (GA) approach is employed, which uses a special crossover operator that can exploit the multi-component nature of the problem. The models are investigated at the hand of an example problem. Sensitivity analyses are performed over the mark up and the discount rate. A set of 93 problems from literature arc solved under the four different payment models and resource type combinations with the GA approach employed resulting in satisfactory computation times. The GA approach is compared with a domain specific heuristic for the lump sum payment case with renewable resources and is shown to outperform it. [ABSTRACT FROM AUTHOR]