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Research Summary : We provide evidence that investors in U.S. public markets are increasingly discounting firms' expected future cash flows during 1980–2013. This trend is shown not only on average across firms, but also within firms over time after alternative explanations are accounted for. To corroborate a link with firm time horizons, we estimate the relationship between an implied discount rate ("IDR") and factors relevant to firm long‐term strategy. We find that IDR is correlated in expected ways with firm investments, management incentives, financial health, ownership, and external pressures—measures that have been argued to correlate with firm time horizons. This article represents one of the first attempts to document market‐wide evidence of shortening firm time horizons. These changing horizons bear important implications for firm strategy. Managerial Summary : Whether U.S. firms have become more short‐term oriented remains an active debate among managers, investors, researchers, and policymakers. In this study, we report that investors have been increasingly discounting the expected future returns of public firms over the last three decades. We find that a firm's discounting rate is explained by signals of its long‐term strategy, including investment decisions, ownership structure, financial health, executive compensation scheme, and short‐term pressures from the external environment. Our findings indicate a market‐wide contraction of firm time horizons, highlighting firm characteristics that suggest how and why firms differ in their time horizons. These demonstrated relationships may help guide firms in devising investment strategies as well as external communications to attract investors that share a firm's preferred time horizon. [ABSTRACT FROM AUTHOR]

The article examines challenges faced by law practitioners while considering the subject industry when applying the income approach in a family law context. Topics discussed include use of discounted cash flow (DCF) method while valuing any business with the income approach; estimation/projection of future income; and role of the subject industry within the income approach.

Abstract Promising growing conditions and favorable renewable energy policies make the western U.S. a potentially suitable region for dedicated woody biomass (DWB) plantations for energy generation. To support the regional development of biomass and biofuels markets, the USDA awarded an AFRI grant to the Advanced Hardwood Biofuels (AHB) Northwest project. As part of the AHB project, GreenWood Resources ("GWR") - a globally diversified timberland investment management company with over 20 years of specialized experience in high-yield, intensive plantation management - installed and managed hybrid poplar DWB plantations at four demonstration sites: Clarksburg, CA; Hayden, ID; Jefferson, OR; and Pilchuck, WA. GWR developed a discounted cash flow ("DCF") investment model based on the AHB project results and plantation management experience across this range of growing and market conditions. The model estimates financial returns and tests the sensitivity of returns to changes in key variables. These results inform directions for future research and challenges for commercial production of DWB. Results indicate that current market pricing for forest biomass in the western U.S. - approximately USD 46/BDMT - produces negative financial returns from DWB plantation investment on all four sites. To produce positive returns at all four sites requires biomass assumptions that are well above the current market (USD 121/BDMT). With this price assumption, plantation investment returns average 8.62% in real, inflation-adjusted terms across all sites, but this biomass price level may make conversion into transportation fuels uneconomic under current fuel prices and policies. Financial returns to DWB investments are most sensitive to changes in price, yield, and land costs. Given current economic conditions and plantation technology, the development of a large-scale DWB plantation base in the western U.S. is unlikely to attract private sector capital without some combination of a material increase in the biomass price, strong policy support, or a dramatic improvement in plantation yields. Highlights • Current pricing for biomass in western U.S. produces negative financial returns. • Biomass investments are unlikely to attract private-sector capital. • Returns are most sensitive to assumptions related to prices, yields, and land costs. • Increase in price or dramatic improvement in yields may change the present situation. [ABSTRACT FROM AUTHOR]

Highlights • We analyze the economic value of a U.S windfarm using long-term LCOE information. • Long-term LCOE of wind energy is obtained from two decades of history. • Monte Carlo and Risk-Neutral valuation is used to valuate a reference windfarm. • Managerial flexibilities and generation cost uncertainty make windfarms more valuable. • Real Option accounts for the flexibility of decision-making with stochastic costs. Abstract Renewable energies are a natural replacement for conventional or fossil fuel energy generation. One of these sources, wind energy, has exhibited significant cost reductions during the last decades. Even though this historical cost reduction trend is well known in the industry and in the academia, information on this cost trend and volatility has been scarcely incorporated in previous works, thus a natural concern arises when assessing their influence on the economic valuation of wind farms. Moreover, wind projects are modular in size and have a short time-to-market, providing a valuable managerial flexibility to defer investment under non-attractive market conditions, such as high development cost scenarios. Traditional evaluation tools often consider those scenarios, wrongly assuming that wind-developers would move forward with the project under such conditions. Accordingly, this paper analyzes the effect of incorporating both generation cost history and investment flexibility in the valuation of wind farms in the United States using Real Options methodology. Taking two decades of cost data and a reference wind farm, this "uncertainty-flexibility" effect is incorporated and valued, finding that the value of the wind project is 14.2% larger than the one neglecting such effect – where cost stochasticity and managerial flexibility are ignored. Therefore, traditional tools for project valuation, such as discounted cash flow and scenario analysis can no longer solely be used, as they do not properly account for the cost reduction trend, uncertainty, and managerial flexibility that a wind farm could face. [ABSTRACT FROM AUTHOR]

Contentions that American managers are too myopic are, in a word, wrong. While some managers very probably behave as if only tomorrow matters, the preponderance of evidence shows this to be untrue. Data on real investment activity, start-up financing, and the competitive position of the U.S. in high value-added products all confirm that U.S. managements are collectively not short-sighted. [ABSTRACT FROM AUTHOR]

The article compares the investment performance of apartment houses to that of common stocks. An overview of the discounted cash flow method is presented. The author examines the investment performance of 20 residential projects financed by the Federal Housing Administration (FHA) with that of 76 industrial stocks from 1952 to 1962 using the discounted cash flow method. An explanations for yield differentials is presented. It is noted that the sample's after-tax rate of return on total capital investment in the FHA was similar throughout the ten-year time period observed.

We identify a setting in which firms are required to disclose discounted cash flow (DCF) estimates relating to the value of their primary assets. ASC 932 (formerly SFAS No. 69) has mandated DCF disclosures for proved oil and gas reserves since 1982, and these reserves constitute the primary assets of oil and gas royalty trusts. For a hand-collected sample of oil and gas royalty trusts, we find that (1) the mandatory DCF disclosures are incrementally value-relevant over historical cost accounting variables, (2) investors misprice royalty trust units because they underweight the disclosed DCF estimates when forecasting future distributions, and (3) media articles bringing attention to discrepancies between price and the disclosed DCF estimates are significant stock price catalysts. While our evidence indicates that mandatory DCF disclosures can be incrementally useful for security valuation, it also indicates that investors may overlook such information, potentially due to lack of attention and accounting expertise. [ABSTRACT FROM AUTHOR]

The article discusses regulatory flexibility in America in relation to an alternative approach to cost-benefit analysis which is known as real options valuation (ROV), and it mentions a case study of the U.S. Food and Drug Administration's Foreign Supplier Verification Program. Regulatory lookback procedures in the U.S. are mentioned, along with discounted cash flow analysis and American President Barack Obama's administration. The practices of U.S. government agencies are also examined.

This article presents a detailed anatomy of the nearly sevenfold run-up in the price of Tesla stock between March 22, 2013 and February 26, 2014, and attempts to determine the role played by investor sentiment. Tesla offers a unique opportunity in this context because the run-up was on the order of magnitude experienced by some of the most volatile technology stocks, but Tesla operates in an industry--automotive manufacturing--and a potential industry--battery construction--that are mature and populated by established competitors. This makes it possible to construct discounted cash flow valuation models that are anchored to established fundamentals. On the basis of these models, in conjunction with a detailed event study and analysis of institutional stock holdings and short-sales data, the authors conclude that the run-up cannot be explained as a rational reaction to fundamental information. Instead, they conclude that, at the end of the run-up, the stock was overvalued by approximately 150%. In their view, the case study provides support for the assertion by Lawrence Summers that price and rational value can diverge significantly for prolonged periods of time. [ABSTRACT FROM AUTHOR]

The article argues that a patent assertion entity (PAE), a company that acquires and enforces patents, is virtually certain of victory in portfolio patent litigation in the U.S. It explains various methodologies for valuing patents, such as discounted cash flow and income-based methods, market-based methods, and cost-based methods. Also discussed are patent paradox, the benefits of patent portfolios to their holders, and predictions of the portfolio theory.

The article presents a comparison of retail rent laws in Great Britain and the U.S. as of February 2014, focusing on precedents and turnover rents in relation to malls in America, as well as information on the British Landlord and Tenant Act 1954 and consumer buying patterns. Base rents for properties in the U.S. are mentioned, along with market value, discounted cash flow, and notional tariffs for various businesses in Great Britain. The drafting of turnover rent provisions is also examined.

Biochar produced from low-value forest biomass can provide substantial benefits to ecosystems and mitigate climate change-induced risks such as forest fires. Forest residues from restoration activities and timber harvest and biochar itself are bulky and thus incur high logistic costs, so are considered major bottlenecks for the commercialization of the biochar industry. The objectives of this study were to assess the environmental footprints and techno-economic feasibility of converting forest residues in Pacific Northwest United States into biochar pellets using portable systems followed by delivery of the final product to end-users for land application (dispersion). Two portable systems (Biochar Solutions Incorporated (BSI) and Air Curtain Burner (ACB)) were considered for biochar production. A cradle-to-grave lifecycle assessment (LCA) and a discounted cash flow analysis method were used to quantify the environmental impacts and minimum selling price (MSP) of biochar. The global warming (GW) impact of biochar production through BSI and ACB was estimated to be 306–444, and 750–1016 kgCO₂eq/tonne biochar applied to the field, respectively. The MSP of biochar produced through BSI and ACB was 1674–1909 and 528–1051 USD/tonne biochar applied to the field, respectively. Pelletizing of biochar reduced GW impacts during outbound logistics (~8–20%) but increased emissions during pelletizing (~1–9%). Results show the BSI system was a more viable option in terms of GW impact, whereas the ACB system can produce biochar with lower MSP. The results of the study conclude that the production of biochar pellets through the two portable systems and applied to fields can be both an environmentally beneficial and economically viable option. [ABSTRACT FROM AUTHOR]

The article focuses on valuation hearing requirements in U.S. bankruptcy courts. Topics include value mortgage portfolios, discounted cash flow (DCF) analysis, and debtor rehabilitation after the filing of bankruptcy protection. Information is provided on the U.S. housing market between 2006 and 2012 and collateralized residential mortgage-backed securities (CRMBS).

The article provides an overview on the valuation of gas and oil properties for property tax purposes in the U.S. It examines the significance of gas and oil properties to finance school districts form the view of the experience in Texas. It discusses the discounted cash flow (DCF) approach as it applies to gas and oil property and a valuation example is also offered.

Purpose -- The purpose of this paper is to draw attention to the fact that the certainty equivalent coefficient net present value criterion, CEC(NPV), in disregarding a fundamental requirement for the calculation of cash flows for purposes of discounted cash flow analysis, invalidates this capital budgeting criterion from the perspective of sound research methodology. The paper also investigates the impact of the UK Companies Act of 2006, the Sarbanes-Oxley Act of 2002, and important reviews such as the Turner Review of 2009, the Walker Review of 2009, and the Review of the Combined Code of 2009 on this operationally invalid capital budgeting criterion, as well as its impact on the process of financial managerial decision making. Design/methodology/approach -- The CEC(NPV) as a discounted cash flow capital budgeting criterion was examined from the perspective of the axioms of cash flow estimation as well as from the definition of the cost of capital in order to ascertain the contribution of this criterion to financial management. The relevant sections of the UK Companies Act of 2006, the Sarbanes-Oxley Act of 2002, the Turner Review of 2009, the Walker Review of 2009, and the Review of the Combined Code of 2009 were studied in order to establish whether the CEC(NPV) was able to satisfy the requirements of this legislation and these important reviews. Findings -- The CEC(NPV) is construct invalid and does not measure what it purports to measure: it over-states financial viability. As a consequence, it does not meet the requirements of sound research methodology and therefore is at odds with the UK Companies Act of 2006, the Sarbanes-Oxley Act of 2002, and falls foul of the Turner Review of 2009, the Walker Review of 2009, the 2009 Review of the Combined Code issued by the Financial Reporting Council. As such it cannot be endorsed by the Financial Services Authority. Originality/value -- The paper usefully shows that the CEC(NPV) denies financial managers application of Fisherian analysis for resolving conflicts in the rankings of mutually exclusive projects, and, the comparison of project cost of capital with their respective internal rates of return. Comparisons of the internal rate of return, not with the risk-free rate (that is assumed to be a constant and which exhibits minimal variability in comparison with the cost of capital), but with the cost of capital cost of capital, are a sine qua non for managerial decision making, especially capital budgeting. [ABSTRACT FROM AUTHOR]

The balanced scorecard has become an essential part of the strategic arsenal of many organizations. When a balanced scorecard is designed well, it can build resilience during challenging times. This article points out some of the problems organizations often have in planning and implementing a balanced scorecard—and how to avoid them. © 2009 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

Entities reporting under IFRSs are required to determine a value in use in accordance with IAS 36: Impairment of Assets. The value in use is the present value of the expected future cash flows. Appendix A to the standard gives guidance on how to apply the DCF calculus in the context of IAS 36. In order to determine a suitable discount rate, the reporting entity is given the choice between three alternative starting points. The requirements of IAS 36 are, in this respect, quite different from the accounting requirements of US GAAP. In this paper we analyse these starting points and demonstrate the functional interrelation between them. Given that the interrelation is complex even under simple assumptions, we will provide guidance to practitioners as to which starting point should be used. We will demonstrate that the weighted average cost of capital (WACC) is the only suitable starting point. Based on this analysis, we also show that the other alternative starting points are not sufficiently clear. When used in practice, the guidance may even give rise to substantial measurement errors and make earnings management possible. Thus, our recommendation to the IASB is to shorten the guidance and delete the other two starting points. [ABSTRACT FROM AUTHOR]

A 'two-stage growth' discounted cash flow (DCF) model is built to test whether changes in the underlying market fundamentals help to explain movements in stock prices. Empirical results on two samples of US and EU stocks show that the 'fundamental' earning price ratio (E/P) explains a significant share of cross-sectional variation of the observed E/P, this impact being stronger in the US market. It is also found that: (i) the fundamental component of the E/P has superior explanatory power than simpler measures of expected earnings growth; (ii) 'non-fundamental' components, interpreted as signals reducing asymmetric information (such as firm size, the number of forecasts and the chartist momentum), mitigate the role of the fundamentals; (iii) current deviations from the fundamentals are affected by ex post adjustment of publicly available information in the EU sample. It is argued that differences in regulatory environments and in the composition of investors between the US and EU financial systems may help to explain these comparative findings. Results appear consistent with the 'market integrity hypothesis' postulating that reliance on publicly observable fundamentals is higher when insider trading is lower. [ABSTRACT FROM AUTHOR]

The article evaluates the use of Monte Carlo simulation method in physician practice valuation in the U.S. This method applies random selection process to create multiple scenarios. The study shows that the Monte Carlo simulation is effective in projecting cash flows and it provides a more rational base from which to negotiate.

Discusses the value of real options theory for the telecommunications industry in the U.S. Use of discounted cash flow (DCF) method in project evaluation and investments; Application of real options methodology in DCF analysis; Implications of real options theory for policymakers.

Harry Trebing [1974] recently suggested that the greatest failing of public utility regulation has been its inability to accomodate change. An opportunity for change presented itself a generation ago when the U.S. Supreme Court released regulation from the burden of "fair value." But rather than avail itself of the opportunity presented, regulation allowed the old debate on fair value to become a new debate on fair return. If once you could always find an engineer somewhere to testify that the fair value rate base was one figure rather than some other, you can now always find an economist somewhere who will testify that the fair return is some figure rather than another. The inability of expert witnesses to agree either as to the methods that ought to be employed to determine the allowable return, or as to the results that follow from the application of different methods, has created a situation where it is now a convention for regulators to assume that the fair or required return on equity is a "subjective factor" that cannot be determined without the application of "informed judgment." The ability of expert witnesses to fall back on their "informed judgment" makes it difficult to assess the usefulness of their testimony and assures that the recommended rates of return proffered by the various witnesses in a regulatory proceeding will be bounded only by the limits to their imagination. [ABSTRACT FROM AUTHOR]

Capital investment forms a critical element of community economic exuberance because investment is a necessary condition for local job formation. Within a capitalist system, the state lacks a direct method of intervention in firm decisions over capital investment. Under these conditions state policy instruments must be aimed at enabling state and local governments to enhance their competitive advantage over other localities by reducing costs to capital investments within their jurisdictions. This article examines the effects of one such government relationship between policy instrument on rural labor markets in the U.S. Its primary focus is to evaluate the government enforced "open-shop" legislation, or the "right-to-work" (RTW) clause of the 1947 Taft-Hartley Labor Relations Act in the context to the rate of local employment growth. The study yielded that RTW legislation proved more important for change in concentrated sector employment, and stronger policy measures by the federal government could have a more systematic and acute impact on regional employment change.

Understanding forestry practices cost is important for predicting the financial outcome of forest management activities. Assessing costs of practices that will be used in the future can be difficult and may result in over or underestimations of financial returns depending on the values used. We used historic real average rates of cost change for the southern United States to assess changes in the values of several loblolly pine plantation management scenarios over time through the use of discounted cash flow (DCF) analysis. Additionally, we analyzed the impact of certain practices cost changes on the financially optimal number of thinnings and rotation age. Findings indicated that declining costs for herbicide site preparation could all but offset the increasing costs of other practices and that a relatively slight increase in timber prices would more than compensate for increasing costs. Also, increasing thinning costs could exacerbate the effects of low sawtimber prices, further decreasing the viability of regimes with multiple thinnings. In the face of stagnant timber prices, the use of operator-select thinnings, and herbicide site preparation could stabilize the long-term financial value of plantation management. [ABSTRACT FROM AUTHOR]

The article discusses the electronic commerce firm Amazon has triumphed over U.S. Internal Revenue Service (IRS) after the US Tax Court ruled in favor of Amazon in a tax dispute involving its use of Amazon Europe Holding Technologies SCS (AEHT), Luxembourg subsidiary for its European operations and transfer pricing arrangements under judgment of Albert Lauber. It mentions the IRS has applied a discounted cash-flow (DCF) methodology to expected cash flows from European business to Amazon US.

This article presents a list of publications related to economic conditions. Some of the publications enlisted are: "Discussion: Is There a Shortfall in Public Capital Investment?" by Henry J. Aaron, "Public Investment and Productivity Growth in the Group of Seven," by David Alan Aschauer, "Public Investment and Private Sector Growth: The Economic Benefits of Reducing America's Third Deficit," "Equipment Investment and Economic Growth," by J. Bradford Delong and Lawrence H. Summers, "Accounting for Slower Economic Growth: The United States in the 1970s," by Edward F. Denison, "Education and the Productivity of the Work Force: Looking Ahead," by Richard J. Murnane, "The Rational Public: Fifty Years of Trends in Americans' Policy Preferences," by Benjamin I. Page and Robert Y. Shapiro and others.