Search

The study aims to explore the role of the real options practices to an appraisal of capital investment decisions. We deployed the Binary logistic regression technique to test the hypotheses of the study. For the binary model, two equations were developed having two dependent variables, first the use of real options, and the second the real options familiarity. The independent variables of the study were the annual capital budget, Capex time, Net profit margin, and R&D. The finding showed listed companies relied on discounted cash flow techniques (DCF). A very few were practising real options only for supplement and to support results from other methods. The real options require too much sophistication and lack of top management support is the major reason for not using real options. The use of real options having a significant relation to the Annual Capital Budget, Net Profit Margin, and R & D, Capex time. Real options Familiarity having a significant relationship with Net Profit Margin and R & D and insignificant with Annual Capital Budget. DCF method is rigid and cannot incorporate the uncertain future and upcoming opportunities. Corporate and academia are suggested to concentrate on real options practised to make the right decision for the corporate, industry, and country progress. [ABSTRACT FROM AUTHOR]

Copyright of Gestión Joven is the property of Asociacion Espanola de Contabilidad y Administracion de Empresas 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 Mexican Journal of Economics & Finance / Revista Mexicana de Economia y Finanzas is the property of Instituto Mexicano de Ejecutivos de Finanzas 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 Przegląd Elektrotechniczny is the property of Przeglad Elektrotechniczny 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.)

Modern performance measures should provide an accurate assessment of the intrinsic value of the company, as well as the value for the owners (shareholders). The essence is maximizing the immanent or guaranteed value of the company. Free cash flow is a starting point for many valuation ratios, including discounted cash flow, price to cash flow (or its inverse, the free cash flow yield). The Discounted Cash Flow (DCF) valuation reflects the ability of the company to generate cash in future. In knowledge economy the main goal of a company should be directed generating the value for the firm and owners. This implicated the rising importance of free cash flow methodologies that enable investors to efficiently value the companies. The aim of this paper is to present practical approach towards the discounted cash flow of the company (free cash flow to the firm and free cash flow to equity) as valuation method.

The inability of existing analytical models to accurately predict future events has, at times, led to the economic failure of mining operations whose financial viabilities were determined based on static assumptions, leaving operational managers with little room to make future decisions. Therefore, the application of a robust decision-making tool, such as Real Options (RO) can minimise losses and more accurately express uncertainty. This paper has considered a stochastic simulation to analyse ROs for a real case iron ore mine, which closed in April 2016. In comparing the net present value from the traditional discounted cash flow (DCF) method to delay, to abandon the operations and to stage the investment options, the ROs method increased the project value by between 56% and 195% depending on the volatility. As a new contribution, a managerial flexibility domain map is proposed in this paper. Thus, flexibility in mining operations creates agility, increases value and mitigates financial losses. [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]

The strong fluctuation of price makes investment decision difficult, especially smallholder rubber plantation that depend solely on rubber production to support their livelihood. An investment analysis of the rubber production was needed to complete the study, so a discounted cash flow (DCF) was introduced to account for this study. The findings of the study illustrate that the investment of rubber seemingly economically feasible. However, the result from the Discounted Cash Flow Analysis showed that the time to recover the initial investment on the rubber plantation is getting longer at the current price of rubber. The payback period will be 11.9 years for small size producers. For medium size plantations, the payback period was estimated to be 12.2, 10.5 and 9.8 years in MI, MII and MIII, respectively. The further findings also suggest that small size producers have less choice in term of output produce that they want to put out in the market. [ABSTRACT FROM AUTHOR]

Recently, market globalization and competition have forced companies to find alternative means to boost sales and revenue. The use of the cash flow is increasingly becoming a viable alternative for managers to improve their company's profitability in a supply chain. In today's business transactions, a supplier usually asks a manufacturer to pay via the advance-cash-credit (ACC) payment scheme if the number of goods procured is high. Additionally, product perishability has been considered in an economic production quantity (EPQ) model since it is a real phenomenon. The present work develops an EPQ model for perishable products under the ACC payment scheme. The objective of the proposed model is to determine the optimal selling price and cycle time while maximizing profit under the ACC payment scheme using a discounted cash flow analysis. A nonlinear optimization algorithm is also proposed to solve the problem. In addition, some numerical examples are employed to illustrate the solution approach and show the concavity of the present value of the total annual profit in terms of both selling price and cycle time. The numerical results show that our proposal algorithm could be applied well to solve the problems. In addition, a sensitivity analysis is conducted to obtain some managerial insights. For example, if the impact of advance payment on procurement cost is relatively smaller than that of cash payment, then it is more profitable for the manufacturer to ask for a cash payment than to receive an advance payment and vice versa. [ABSTRACT FROM AUTHOR]

Copyright of Ekonomika APK is the property of Economy of Argo-Industrial Complex 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.)

Goal: This study aims to assess the impact of using the method of real options in investment analysis through a case study on a retail firm. Design / Methodology / Approach: It was targeted the applications of the real options method in a different type of environment and it was compared to another method more commonly used, the discounted cash flow method (DCF). The implementation and assessment of the real options method was investigated by means of a case study conducted in an investment analysis in a retail units firm. Results: The use of the real options method showed a more concise applicability over the DCF method. The results show that the project’s value, after the inclusion of managerial flexibility, increased significantly, which indicates that the analysis of the discounted cash flow undervalued the investment in question, since it disregarded the flexibility to expand or abandon the project. Limitations of the investigation: The presented method is proper to long-term processes where it is possible to make changes during the project. Investments in this sector usually are more related to short and medium-term decisions, making the application difficult due to the short decision-making period available to the managers. Practical Implications: The study provided the incorporation of flexibility through different pathways during the building project in a retail units firm. It was showed different scenarios where practitioners could decide among expanding, proceeding, reducing or abandoning the retail units based on the characteristics of their investments. Originality/value: The results obtained are an indication of this methodology to industrial businesses that are relatively volatile and that need a certain degree of flexibility in order to burgeon, such as the case of the retailing sector. [ABSTRACT FROM AUTHOR]

This paper starts with the premise that marketing should be accountable, and considers by which measure or measures it should be held to account. "Marketing" for the purposes of this paper is defined as satisfying customers and thereby maximising net inward cash flow. This suggests that marketing performance can and should be evaluated financially, ideally with a single number, or "silver metric". The authors review the arguments for and against silver metrics in general and, in particular, three popular candidates: ROI, Discounted Cash Flow (DCF) and Return on Customer. So far as performance evaluation is concerned, six objections to the use of ROI, five to the use of DCF and four to Return on Customer are identified. Furthermore, the authors highlight the critical and potentially misleading role of forecasts as benchmarks for performance assessment. At the same time, the value of DCF techniques, such as customer equity and customer lifetime value, is recognised for planning purposes. A more satisfactory means for assessing marketing performance is net profit plus any enhancement of the marketing asset albeit that requires multiple metrics, taken together as a proxy for future cash flows. [ABSTRACT FROM AUTHOR]

The objective of this work is to describe a method of assessing the flexibility of a manufacturing system, in an uncertain market environment, under lifecycle considerations. The flexibility of a manufacturing system is determined by statistical analysis of the discounted cash flow (DCF) estimates of the manufacturing system's lifecycle cost, over a time horizon and for a large variety of market scenarios. The system's lifecycle cost is calculated at a minimum level with the help of a specially developed algorithm. The method is used in a test case for investing in a production system, using real-life data derived from the automotive industry. [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]

Hydrogen is a prominent clean fuel option for combatting global warming and producing low-emission, ecologically friendly electricity. Consequently, the proton exchange membrane water electrolysis (PEMWE) hydrogen refueling station has undergone thorough economic and environmental analysis. This work intends to fill the gap by presenting the influence of various operating circumstances and design parameters on the economic and environmental aspects of PEMWE based on various behaviors and features (I–V curve) under various scenarios. Profitability analysis (PA) is performed in terms of the net present value (NPV), discounted payback period (DPBP), benefit-cost ratio (BCR), and internal rate of return (IRR) from cumulative discounted cash flow diagrams (CFD). Also, sensitivity analysis (SA) is conducted to assess the impact of different economic factors, while simultaneously establishing CO 2 footprint guidelines for optimal operating and design conditions. The findings highlight that enhancing economic feasibility and reducing environmental concerns are simultaneously achievable by increasing cathode pressure, operating temperature, and decreasing membrane thickness. At membrane thicknesses over 100 μm, the project becomes unprofitable and inefficient at 1.85 V. PEMWE becomes more valuable and sustainable with a current density of 12,000 A/m2 or higher, but it releases more CO 2 emissions. Hence, utilizing excess renewable electricity in PEMWE addresses environmental concerns and enhances the overall ecological sustainability of hydrogen production. [ABSTRACT FROM AUTHOR]

Policies that attempt to balance timber production with non-market values that forests provide are common across the United States. Such is the case in northern Maine, USA, where management of critical areas of mature softwood-dominated forest are regulated through the State’s primary wildlife management agency. We use a case study approach with qualitative and quantitative analyses to understand the persistent difficulties encountered by both forest and wildlife managers when implementing this policy. Interviews with foresters and wildlife biologists established the management parameters, and simulated management scenarios compared forest management outcomes with respect to both financial and wildlife habitat provision goals. The model results indicated that there are opportunities for comparable revenues within regulated habitat areas as without, although the returns varied due to legacy of previous management and species composition. More importantly, the interviews revealed that differing habitat metrics used by foresters and biologists are a barrier to communication and management planning, and thus also a barrier to effective policy implementation. We close with thoughts on the applicability of both the methods and results to other situations where an understanding of multiple-use forest policy implementation is desired.

The authors comment on an article by S.H. Penman, which criticized an article by the authors. The authors' article argues that the value estimates from a residual income model and a discounted cash flow model should yield identical results. It is the aim of the authors to rebut each of Penman's claims concerning their article. Penman is critical of the authors' claims that cash flow and residual income models should yield the same valuation. Penman also expresses concern over the author's terminal value.

A claim is commonly made that cash flow and accrual accounting methods for valuing equities must always yield equivalent valuations. A recent paper by Lundholm and O'Keefe 2001, for example, claims that, because of this equivalence, there is nothing to be learned from empirical comparison of valuation models. So they dismiss recent research that has shown that accrual accounting residual income models and earnings capitalization models perform, over a range of conditions, better than cash flow or dividend discount models. This paper demonstrates, with examples, that the claim is misguided. Practice inevitably involves forecasting over finite, truncated horizons, and the accounting specified in a model -- cash versus accrual accounting in particular -- is pertinent to valuation with finite-horizon forecasting. Indeed, the issue of choosing a valuation model is an issue of specifying pro forma accounting, and so, for finite-horizon forecasts, one cannot be indifferent to the accounting. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association 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.)

We propose a method for valuing new, recoverable, and recovered assemblies (products, components, parts, etc.) in production systems with reverse logistics. Values of assemblies influence their opportunity holding cost rates and are hence essential for comparing inventory strategies in average cost models. We argue that the proposed method is 'correct' from a discounted cash flow (DCF) point of view. We refer to some previous results on valuing assemblies in systems without disassembly of returned products that seem to confirm this. Furthermore, we test the method for a specific example with disassembly of returned products. The simulation results indicate that the method indeed leads to (nearly) DCF optimal inventory strategies. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association 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.)

The article uses empirical evidence to show the reliability of intrinsic value estimates derived from three theoretically equivalent valuation models, the discounted dividend (DIV) model, the discounted free cash flow (FCF) model, and the discounted abnormal earnings (AE) model. The authors of this article use Value Line (VL) annual forecasts of the elements in these models to calculate value estimates for a sample of publicly traded firms followed by Value Line during 1989-93. The authors contrast the reliability of value estimates in terms of their accuracy and in terms of their explainability.

The use of solar energy for power generation using the innovative solar chimney concept has been explored by many researchers mostly with the help of analytical models as well as CFD simulations while experimental studies for a pilot and bench scale facilities have been carried out. The efficiencies of these chimneys, however, are less than 1% (~0.07% for 50 kW pilot plant similar to Manzanares plant in Spain). In the present study, an effort has been made to make modifications in the chimney design to improve the efficiency of the chimney in terms of power generation. CFD simulations have been carried out for this modified design and the efficiency is seen to improve to 0.12% for a 50 kW chimney. Furthermore, a techno-economic feasibility analysis has been carried out for a conventional 5 MW solar power plant which can be installed on the western part of India, which receives good solar irradiation throughout the year. Two cases with and without government subsidies have been considered. It is observed that a high rate of return (~20.4%) is obtained for a selling price of electricity of Rs 5 per kWh with government subsidy, while a rate of return of ~19% is obtained for Rs 10 per kWh without government subsidy.

ABSTRACT This research analyzes the economic and financial feasibility of implementing a biodigester for confinement of beef cattle on a farm located in the State of São Paulo, through the approach of discounted cash flow. The anaerobic digestion technology arouses interest, due to its advantages with the generation of electricity and the pollution reduction of water resources, soil and air, from the biogas and bio-fertilizer production, high value-added products to cattle raising. It was verified that the treatment system of cattle manure with biodigesters generate biogas and fertilizer as revenue, with free cash flows that enable a return on investment in 3.8 years and return an IRR 26.40% and an MIRR of 10.69%; all above than the minimum rate of attractiveness which confirmed the economic and financial viability of the investment.

The volatility of the global economy, changing business practices, and academic developments have created a need to re-examine Indian corporate capital budgeting practices. Our research is based on a sample of 77 Indian companies listed on the Bombay Stock Exchange. Results reveal that corporate practitioners largely follow the capital budgeting practices proposed by academic theory. Discounted cash flow techniques of net present value and internal rate of return and risk adjusted sensitivity analysis are most popular. Weighted average cost of capital as cost of capital is most favoured. Nevertheless, the theory-practice gap remains in adoption of specialised techniques of real options, modified internal rate of return (MIRR), and simulation. Non-financial criteria are also given due consideration in project selection.

The article presents the results of research carried out in the framework of a comparative analysis of the most common, effective approaches and methods for assessing oil and gas companies. The conclusions about the need for a set of methods for evaluating mergers and acquisitions. The leading role in the article is given to the method of discounted cash flows, which allows to get the real value of oil and gas company, to take into account synergies and possible risks to the author developed the methodology for calculating the weighted average cost of capital as the discount rate