Search

Health technology assessment (HTA) guidance often recommends a 3% real annual discount rate, the appropriateness of which has received limited attention. This article seeks to identify an appropriate rate for high-income countries because it can influence projected cost-effectiveness and hence resource allocation recommendations. The author conducted 2 Pubmed.gov searches. The first sought articles on the theory for selecting a rate. The second sought HTA guidance documents. The first search yielded 21 articles describing 2 approaches. The "Ramsey Equation" sums contributions by 4 factors: pure time preference, catastrophic risk, wealth effect, and macroeconomic risk. The first 3 factors increase the discount rate because they indicate future impacts are less important, whereas the last, suggesting greater future need, decreases the discount rate. A fifth factor—project-specific risk—increases the discount rate but does not appear in the Ramsey Equation. Market interest rates represent a second approach for identifying a discount rate because they represent competing investment returns and hence opportunity costs. The second search identified HTA guidelines for 32 high-income countries. Twenty-two provide no explicit rationale for their recommended rates, 8 appeal to market interest rates, 3 to consistency, and 3 to Ramsey Equation factors. Declining consumption growth and real interest rates imply HTA guidance should reduce recommended discount rates to 1.5 to 2+%. This change will improve projected cost-effectiveness for therapies with long-term benefits and increase the impact of accounting for long-term drug price dynamics, including reduced prices attending loss of market exclusivity. • Health technology assessment guidance often recommends an annual discount rate of 3%, but most guidance provides no supporting rationale. The literature advances 2 approaches to identify an appropriate rate: (1) bottom up (the Ramsey Equation) sums contributing factors, but economists disagree on their values; (2) real interest rates can represent returns available from other investments, but which market rate to use is unclear. • Pragmatically, we can start with the commonly recommended 3% discount rate and consider trends suggesting recent changes to this value. Projected declines in consumption growth and observed declines in real interest rates suggest health technology assessments should now recommend a discount rate of 1.5% to the low 2% range. • Using a lower discount rate will improve projected cost-effectiveness for therapies with long-term (eg, lifetime) benefits and increase the impact of accounting for long-term drug price dynamics, including reduced prices attending loss of market exclusivity. [ABSTRACT FROM AUTHOR]

Over the last decade, restructuring of railway systems has resulted in infrastructure management assets demanding increased performance and reliability while adopting budget limits and reduced time available for maintenance. In fact, the current routine and major programmed maintenances are such capital-intensive activities that transport operating companies always attempt to optimise the operational procedures and related assets' performances towards minimising the costs. Characteristically, the use of macro synthetic fibre reinforcement is proposed to improve the structural performances and service life of the sleeper component. Accordingly, this study addresses the economic feasibility of implementing macro synthetic fibre reinforced concrete (MSFRC) as an alternative material for railway sleeper applications. Through a life cycle costing (LCC) approach, the study evaluates the impact of different asset phases such as acquisition, operation and maintenance, and end-of-life towards a cost comparison of MSFRC with conventional sleeper materials. Hence, the most financially viable option is identified, although key economic parameters are varied to simulate future market values. [ABSTRACT FROM AUTHOR]

The aim of this paper is to design the package of the R statistical software called "Annuity Random Interest Rate", referred hereinafter as AnnuityRIR, in order to calculate the value of an n-annuity with payments of one unit each when the interest rate is random. To do this, we have employed different approaches; the two main methodologies treated in this study consider that all non-central moments of the capitalization factor are known, or contrarily some of them are unknown. Consequently, five different approaches have been developed and the practical application of the proposed methods is reflected in this paper by pricing an annuity with a random risk-free interest rate during the last ten years. The version is available from CRAN: https://cran.r-project.org/web/packages/AnnuityRIR/index.html. [ABSTRACT FROM AUTHOR]

Accounts receivable and payable are one of the most common types of financial instruments of agricultural enterprises. Until recently, such debt was considered a traditional accounting object with established recognition rules, cost measurement and disclosure. However, since the end of 2019, the valuation of such financial instruments has changed due to introducing the present value as a priority for its long-term type. The article aims to reveal the methodology for determining the present value of long-term debt as the most common type of financial instrument. The specifics of the application of the present value for the assessment of long-term debt were disclosed. It was substantiated which types of such debt are subject to the discounting requirement and which are not. The problem points of introducing a new type of assessment, which affect the data of financial statements, were identified. The article contains the necessary data and rules for the most reliable calculation of the present value of long-term receivables and long-term liabilities as financial instruments. The study results show that for the most accurate and objective determination of the present value of long-term receivables and long-term liabilities as financial instruments, the agricultural enterprise needs to record the methodology of cost measurement of such objects in the Regulation of accounting policy. In particular, it is necessary to specify the object (which type of long-term debt is subject to discounting and which is not), the calculation (formula), the variable (discounting rate selection procedure) and the documentary (a form of the primary document) components.

This study aims to explore the feasibility of adopting international capital budgeting (ICB) Criteria, specifically Net Present Value (NPV) and Adjusted Present Value (APV), as more suitable criteria for international companies when making investment decisions (ID). The study also elucidates the equations related to measuring the results of ICB Criteria, contributing to the estimation and prediction of future cash flows. The research sample included analysts, investors, academics, financial managers, and individuals interested in foreign investments and financial data analysis across all service contract fields. The researcher distributed 343 valid survey forms, including paragraphs and questions, and collected and classified the data using the Statistical Package for the Social Sciences (SPSS version 24). The study concludes that ICB Criteria (NPV and APV) based on discounted cash flows (DCF) are preferred measures for making optimal ID in the Iraqi environment. [ABSTRACT FROM AUTHOR]

Copyright of Accounting & Finance / Oblìk ì Fìnansi is the property of Institute of Accounting & Finance 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 case study prepared to illustrate the topic deals with the determination of the present value of the construction work carried out by the tenant. To carry out this task, an expert is really needed, who will prepare an expert opinion Construction work was carried out a few years ago and the lesse requests a valuation up to the present. This topic is interesting from the way of calculating the value as well as the given topic. The lessee is entitled to use the item in the manner specified in the contract; unless otherwise agreed, appropriate to the nature and purpose of the matter. The lessee is obliged to use the item only if it has been agreed upon or if not using the item would depreciate more than using it. The tenant in this study rented premises for the practice of pharmacy. For this reason, he was forced to adapt the rented premises to proper functioning. He performed the work in accordance with the contract with the lessor of the premises. The case study contains a detailed description of the topic as well as a possible solution to such a case. [ABSTRACT FROM AUTHOR]

Pig production is one of the most important elements of Serbian livestock breeding sector. Although it faces numerous challenges, there is not enough research focused on its economic effectiveness. The goal of this research is to analyze influence of regional disparities on economic efficiency of investments in Serbian pig production. The main methodological approach was to determine the present value of investments in pig production (for Mačva and Šumadija regions). Authors applied sensitivity and scenario analysis, as well. Riskiness of investments is compared using standard deviation and coefficient of variation of the expected present value. The results indicated significant influence of labor costs on net cash flows (especially in Šumadija region). Analysis revealed that (in usual circumstances) investments in pig production in Mačva region are more economically efficient. Nevertheless, rather small increase in pig price could lead to equal present values in both regions. It was determined that investments are riskier in Šumadija region. [ABSTRACT FROM AUTHOR]

Given the drastic changes in the environment, resilience is a key focus of ecosystem management. Yet, the quantification of the different dimensions of resilience remains challenging, particularly for long-lived systems such as forests. Here we present an analytical framework to study the economic resilience of different forest management systems, focusing on the rate of economic recovery after severe disturbance. Our framework quantifies the post-disturbance gain in the present value of a forest relative to a benchmark system as an indicator of economic resilience. Forest values and silvicultural interventions were determined endogenously from an optimization model and account for risks affecting tree survival. We consider the effects of differences in forest structure and tree growth post disturbance on economic resilience. We demonstrate our approach by comparing the economic resilience of continuous cover forestry against a clear fell system for typical conditions in Central Europe. Continuous cover forestry had both higher economic return and higher economic resilience than the clear fell system. The economic recovery from disturbance in the continuous cover system was between 18.2 and 51.5% faster than in the clear fell system, resulting in present value gains of between 1733 and 4535 € ha−1. The advantage of the continuous cover system increased with discount rate and stand age, and was driven by differences in both stand structure and economic return. We conclude that continuous cover systems can help to address the economic impacts of increasing disturbances in forest management. [ABSTRACT FROM AUTHOR]

The inclusion of service crops in agricultural rotations has many advantages in terms of resource conservation and sustainability of production systems. Although in Argentina it is a practice in constant increase, in the province of Santa Fe, its implementation is in an exploratory stage. To promote its implementation, the objective of this work is to evaluate, in economic terms, the incorporation of service crops to frequent agricultural rotations in the centre of Santa Fe province. Tree agricultural rotations were compared, with a duration of four years each and different degrees of intensification: two frequent in the area under study and one improvement proposal including Vicia sp. as a service crop and rapeseed (Brassica sp.) for commercial purposes. This comparison was made in economic terms, using the present value method (or updated cash flow) and the cost-benefit ratio of each of the rotations. Sequences were also compared in environmental terms, considering nitrogen and phosphorus balance and carbon sequestration. The results show that, although there are costs associated with the implementation, maintenance and drying of service crop to the rotation, the profitability of the sustainable intensive sequence exceeds the Fequent rotations analysed. In addition, in terms of carbon capture, it is the best performer. The proposed rotation contributes to generating an economic gain with a positive environmental impact, meeting the need for sustainable production. [ABSTRACT FROM AUTHOR]

Pig production is one of the most important elements of Serbian livestock breeding sector. Although it faces numerous challenges, there is not enough research focused on its economic effectiveness. The goal of this research is to analyze influence of regional disparities on economic efficiency of investments in Serbian pig production. The main methodological approach was to determine the present value of investments in pig production (for Mačva and Šumadija regions). Authors applied sensitivity and scenario analysis, as well. Riskiness of investments is compared using standard deviation and coefficient of variation of the expected present value. The results indicated significant influence of labor costs on net cash flows (especially in Šumadija region). Analysis revealed that (in usual circumstances) investments in pig production in Mačva region are more economically efficient. Nevertheless, rather small increase in pig price could lead to equal present values in both regions. It was determined that investments are riskier in Šumadija region.

ABSTRACT This paper aims to identify the explanatory factors of mandatory disclosure (MD) and voluntary disclosure (VD) levels related to discount rates, based on disclosure theories. The size, leverage, profitability, and audit firms were selected from different theories, namely agency theory, signaling theory, positive accounting theory, including the political cost hypothesis, and the cost of capital theory. Furthermore, the materiality (weight of the items) and the relevance (nature) of the topic were also considered, based on the evidence already obtained in the literature. Research on disclosures related to discount rates has been assessed either as an incidental topic or from a limited-scope analysis, particularly with respect to MDs. This paper assesses this topic as its specific object of analysis for both MD and VD. The use of the discount rate has been assuming growing importance within financial reporting. Therefore, this topic should deserve particular attention from international standard-setting bodies. The understanding of the proper set of items to be disclosed and understanding the factors that explain its disclosure, aligned with the efforts to assure its compliance by legal authorities, may contribute to reducing asymmetries and increasing transparency in entities' financial reporting. This study uses the method of archival research and content analysis of consolidated reports and accounts for the year 2020 of listed entities in Euronext Lisboa. Regression models were used, having disclosure indices related to discount rates as dependent variables. This paper finds a positive association between disclosures related to discount rates and the entity’s size, as well as the materiality and the relevance, assessed by the weight of the items and the nature of the topic under assessment, respectively. It adds new explanatory factors on the VDs and MDs related to discount rates in a broader perspective of analysis.

The article deals with cash flows of future payments based on a promised payment in the area of life or pension insurance. Such a cash flow therefore consists of biometrically dependent values in respective future periods. The article presents a new approach and an iterative procedure for deriving formulae to determine these values. The application of the approach is exemplified for a central unit present value in the Heubeck mortality table model. The use of cash flows for the duration of future payments, the forecast of present values as well as premium reserves, and for the full yield curve approach is illustrated. [ABSTRACT FROM AUTHOR]

This paper studies the dynamic relationship between ship prices and operating profits by using the fact that these two factors are cointegrated. To conduct an empirical analysis, we select Panamax 76K 5-year second-hand prices and 1-year time charter rates, and then define their linear combination as a log price–charter ratio. We find that almost all variations in price–charter ratios correspond to changing expectations about future returns. This finding implies that the mean reversion in price–charter ratios arises mainly from ship prices as prices tend to move toward operating profits. The implication is that price–charter ratios can be used to schedule ship investment timing. When unexpected down-side risks occur, one preemptive action to minimize additional losses is to lower vessel exposure right away before ship prices plummet in accordance with movements in the freight market. [ABSTRACT FROM AUTHOR]

This paper is concerned with financial application of Monte Carlo simulation of infinite series. In fact, present value of a cash flow is represented as infinite series. Hence, the Monte Carlo may be applied to approximate the present value. It is seen that the Monte Carlo method is sample approximation of the mean of cash flow computed at a stopping time. The stopping time, first, is considered as an up-crossing time point of sequence of uniform random variables and then it is replaced by up-crossing of macro-economic variables (called as factor) which brings the dependency structure to the problem which is modeled by auto-regressive to any things (ARTA) models. Here, two different Monte Carlo simulation methods are presented. A financial application is also given. Continuous time extensions of results are also proposed. Finally, a concluding remark section is given. [ABSTRACT FROM AUTHOR]

Look-ahead selection is a sophisticated yet effective algorithm for genomic selection, which optimizes not only the selection of breeding parents but also mating strategy and resource allocation by anticipating the implications of crosses in a prespecified future target generation. Simulation results using maize datasets have suggested that look-ahead selection is able to significantly accelerate genetic gain in the target generation while maintaining genetic diversity. In this paper, we propose a new algorithm to address the limitations of look-ahead selection, including the difficulty in specifying a meaningful deadline in a continuous breeding process and slow growth of genetic gain in early generations. This new algorithm uses the present value of genetic gains as the breeding objective, converting genetic gains realized in different generations to the current generation using a discount rate, similar to using the interest rate to measure the time value of cash flows incurred at different time points. By using the look-ahead techniques to anticipate the future gametes and thus present value of future genetic gains, this algorithm yields a better trade-off between short-term and long-term benefits. Results from simulation experiments showed that the new algorithm can achieve higher genetic gains in early generations and a continuously growing trajectory as opposed to the look-ahead selection algorithm, which features a slow progress in early generations and a growth spike right before the deadline. [ABSTRACT FROM AUTHOR]

Investment is one of the most crucial factors for a company. The decisions that a company makes in an investment uncertainty environment with high global competition, such as in the shipping industry, affects the life of the company either positively or negatively. Therefore, correct decision-making is extremely important particularly in an environment of investment uncertainty. Fuzzy set theory can be used to represent uncertainty and vagueness to generate decisions in decision-making problems. In this study, the aim is to evaluate ship investment by means of Net Present Value (NPV), Profitability Index (PI), and Payback Period (PP) under the Trapezoidal Interval Type-2 Fuzzy environment. In addition, two methods, Interval Type-2 Fuzzy Payback Period (IT2FPP) and Interval Type-2 Fuzzy Profitability Index (IT2FPI), were developed for the first time in the literature by integrating Interval Type-2 Fuzzy with traditional methods. These methods were then successfully applied to a real case study of ship investment for evaluation in the shipping industry in an uncertain environment. [ABSTRACT FROM AUTHOR]

This study provides the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are well-populated, but are unreliable outside the U.S. We adapt and extend the log-linear and present-value (LPV) framework—combining an accounting valuation anchor, its expected growth, and market prices—for estimating ERPs internationally, and implement a correction for the use of stale accounting data. An LPV ERP anchored on the book value of equity is positively associated with future returns in 26 of 29 equity markets, and largely subsumes the predictive ability of a broad set of firm characteristics previously shown to be associated with expected returns. JEL Classifications: D83; G12; G14; M41. [ABSTRACT FROM AUTHOR]

Lithuanian stock market still lacks of attention from big investments despite its merger with Latvian and Estonian stock markets. Now all three markets are part of NASDAQ stock exchange group and making new steps to be more attractive. And the main attraction for investors is growing value of their portfolios. The main article’s purpose is estimation of change in value of Lithuanian stock market in past 10 years from 2010 till 2020 by using Present Value calculations. The results show positive growth of portfolios by at least for 50% per last 10 years with inflation taken into account. Such growth was assured by cash flows received from dividends and stock prices on ex-dividend day of 2020. The advancers of Lithuanian stock market are Telia Lietuva, Ignitis and Apranga. These companies apply generous dividend policy and it made impact to growth of their value from 100% to 200%. Few companies showed negative growth of their Present Value during last decade. As a rule, such companies have poor dividend history, i.e. the amount of paid dividends was small or equal to zero. At last, COVID-19 has made the negative impact on all stock markets and Present Value ratios calculated in this article.

The purpose of the article is to disclose the types of long-term debt liabilities, which need to be evaluated at the balance sheet date at their present value, to substantiate the procedure for calculating the present value and reflecting of accounting differences in accounting system. The requirements of national accounting standards regarding the display of long-term receivables and liabilities in accounting and reporting are discussed in the article. The methods of selecting the interest rates and the procedure of calculating their present value are described. It is proved that considering the national accounting standards there is uncertainty and multivariation concerning discount rates and the procedure of calculating the present value of long-term liabilities and distribution of discount variances. Due to this fact, the decision on the application of discount rates and the procedure of calculating the present value are made by accounting entities on their own based on the professional judgment of an accountant. It is proved that it is advisable to calculate the present value of long-term liabilities on the first balance sheet date after their occurrence using a quarterly period. It is argued that during the transferring long-term liabilities to current ones, discount variances should be written off at the same time. It is concluded that the discount variances should be accounted with applying the accounts of other income and expenses. An example of calculating the present value of long-term liabilities and accounting entries to it are also given. It is determined that the reflection of the present value of long-term liabilities in the accounting and reporting, that arose in connection with the acquisition of assets, does not affect their initial and further assessment. It is proposed to form and approve at the state level the Guidelines for determining the present value of long-term liabilities, that are to be discounted, and the distribution of discount variances between reporting periods.

In this paper, a mathematical model is developed for a coordinated and non-coordinated two-echelon inventory system comprising of a single manufacturer and a single retailer. The objective of the model is to demonstrate the optimality of cycle time and inventory decisions under the phenomena of different inflation rates at the manufacturer and retailer points. Also, it is aimed at determining the annual net revenue of the supply chain (SC). In the proposed model, the present value of the inflated ordering/set-up costs, purchase/unit costs, carrying costs and the gross revenue is computed for the retailer, manufacturer and the SC. A numerical example is devised to illustrate the optimality of decision variables and the objective function. Also, the sensitivity analysis is carried out. Results show that the present value of the annual net revenue of the retailer, manufacturer and SC decreases with increased inflation rate at the retailer and decreased inflation rate at the manufacturer simultaneously. [ABSTRACT FROM AUTHOR]

We show that dividend-growth predictability by the dividend yield is the rule rather than the exception in global equity markets. Dividend predictability is weaker, however, in large and developed markets where dividends are smoothed more, the typical firm is large, and volatility is lower. Our findings suggest that the apparent lack of dividend predictability in the United States does not uniformly extend to other countries. Rather, cross-country patterns in dividend predictability are driven by differences in firm characteristics and the extent to which dividends are smoothed. [ABSTRACT FROM PUBLISHER]

Branding of companies and products are comparative advantages that can provide growth and development of the company. Estimating the brand in companies is necessary for the purpose of analyzing and determining whether planned investments in the brand will provide the company with adequate wages. In order to achieve this goal, marketing managers need to get to know the value of the brand and the methodology of valuation. By analyzing domestic business practice, it was established that marketing managers do not have enough knowledge about the problem of brand values and methodology of valuation. The aim of the research is to analyze and understand the methodology of valuating the brand based on the combined methods of valuing, in discounting cash flows and royalties. This would indicate the need for more active access to the branding and investment strategy in order to satisfy the interests of companies and consumers.

Leases often appear to be a practical way of securing some property. The advantage of the lease is in easy replacement and minimum engagement of resources for the acquisition of assets. However, sometimes leases, depending on their form, also serve to hide the financing through the so-called “off -balance financing”. With the aim of eliminating these unwanted effects, the IASB has adopted a new standard for leases – the International Financial Reporting Standard 16 Leases. The key change from the previous accounting model for lease recognition is in the financial statements of the lessee. This change results in recognition of lease liabilities for practically all forms of leases. Of course, this also entails recording the appropriate property item of asset in the financial statements. The result of this approach is also significantly different recognition of expenses during rental time, as well as the nature of expense. This applies particularly to operating leases that do not recognize assets and liabilities in the existing model, and the effect on profit and loss is based on a linear model that most often corresponds to the contractual lease payment dynamics. In this paper the authors research the implication of the new accounting model for leases on financial statements.