PERPETUITY RATE OF RETURN ANALYSIS

This paper introduces a new method of capital project analysis called the perpetuity rate of return (PRR). As implied by its name, the PRR is found by transforming a project's cash flow stream into a perpetuity and then relating this value to the required investment outlay. The PRR method is essentially a compromise between the NPV and IRR techniques. Like the NPV, the PRR correctly values a project's cashflows by using the market-determined cost of capital as the discount rate; like the IRR, the PRR is a rate of return that is appropriately compared to the cost of capital to determine a project's acceptability. The new yield-based method fares well in comparison with the IRR on a conceptual level and appears to have practical potential.     

TECHNICAL NOTE A NOTE ON THE COST OF OWNERSHIP,CAPITAL RECOVERY AND DEPRECIATION

This paper develops an after-tax version of the classical capital recovery equation and demonstrates its value as a screening device and as an expository tool to convey conceptual understanding of the cost of ownership, capital recovery and depreciation.     

PER UNIT COST ALLOCATION OF INVESTED CAPITAL WITH ANTICIPATED NON-LEVEL PRODUCTION: THE CASE OF EXTRACTIVE INDUSTRIES

The concept of equivalent annual annuity (EAA) has long been used as a method of costing recovery of invested capital and the required return on invested capital over the productive life of a capital project. Academic texts almost universally use EAA methodology with level payment streams (annuities) to allocate capital costs. We develop a methodology for allocating capital costs evenly over each unit of production for projects with anticipated non-level production. This methodology uses a modified EAA approach that allows non-level annuity payment streams. Capital cost allocation is an important component in computing the value of extracted minerals for severance tax purposes; however, many firms and state and federal agencies use ad hocdepreciation schedules to allocate these costs. Ad hocdepreciation methods such as modified accelerated cost recovery system (MACRS) may be appropriate for income tax purposes but are inconsistent with commonly found requirements that severance taxes “shall be assessed on the wellhead or mine mouth fair market value.” The modified EAA approach provides a straightforward alternative that is based on sound financial methodology.     

THE IMPACT OF POLITICAL RISK ON THE FOREIGN DIRECT INVESTMENT DECISION: A CAPITAL BUDGETING ANALYSIS

Using a capital budgeting framework, we examine the impact of political risk on the foreign direct investment decision. Political risk may alter operating cash flows via discriminatory regulations as well as the investment via expropriation. We model the impact of political operating costs and expropriation costs on the NPV of a project under the assumption that the parameters that affect the NPV are constant over the life of the project. Next, we provide an illustration for the case in which the relevant parameters are variable over the life of the project. The paper concludes with an example of political risk in the 1990s, the case of Black Sea Energy Ltd.'s investment in Russia.     

APPLICATION OF CHANCE-CONSTRAINED PROGRAMMING TO CAPITAL RATIONING PROBLEMS WITH ASYMMETRICALLY DISTRIBUTED CASH FLOWS AND AVAILABLE BUDGET

Most applications of chance-constrained programming are based on either normally distributed random variables or random variables with symmetric distributions such as uniform, which can be approximated rather accurately by the normal distribution. In this paper we study pure capital rationing with selection of the best project mix when cash flows and available budget are random variables with asymmetric distributions. We show that solutions obtained by chance-constrained programming using normality approximation for asymmetrically distributed random variables fail to satisfy budget constraints when cash outflows are skewed to the left, indicating that realized cash outflows are more likely to be higher than expected.     

A NEW PERSPECTIVE ON MULTIPLE INTERNAL RATES OF RETURN

The most commonly cited drawback to using the internal rate of return to evaluate deterministic cash flow streams is the possibility of multiple conflicting internal rates, or no internal rate at all. We claim, however, that contrary to current consensus, multiple or nonexistent internal rates are not contradictory, meaningless or invalid as rates of return. There is, moreover, no need to carefully examine a cash flow stream to rule out the possibility of multiple internal rates, or to throw out or ignore “unreasonable” rates. What we show is that when there are multiple (or even complex-valued) internal rates, each has a meaningful interpretation as a rate of return on its own underlying investment stream.It does not matter which rate is used to accept or reject the cash flow stream, as long as one identifies the underlying investment stream as a net investment or net borrowing. When we say it does not matter which rate is used, we mean that regardless of which rate is chosen, the cash-flow acceptance or rejection decision will be the same, and consistent with net present value.     

MANAGING CAPITAL EXPENDITURES : APPRAISAL OF SPECIFIC PROPOSALS

High income-tax rates and an increasing price level, prominent among the economic developments of the last 20 years, have long been strongly criticized in business circles. They are considered major deterrents to investment, acting as brakes on the growth of the economy. Demands for lower tax rates, and for a halt to price escalation (usually called inflation), are constant topics in the business press, in public addresses by high company officials, ¹ in presentations for the justification of price or rate increases before regulatory commissions, and in institutional advertising designed for the general public.     

A COMPARISON BETWEEN TWO MULTIATTRIBUTE DECISION METHODOLOGIES USED IN CAPITAL INVESTMENT DECISION ANALYSIS

Two multicriteria decision methodologies applied to evaluating capital investments are the Analytic Hierarchy Process (AHP) and the Non-Traditional Capital Investment Criteria (NCIC) model. In this paper we demonstrate that a mathematical relationship exists between these two models. In-particular, a data set obtained by one method can be mapped into an equivalent data set obtained using the other method. It is suggested that this offers an opportunity of empirically assessing decision makers judgmental capabilities under varying data collection methods. An example problem illustrates the manner in which such comparisons can be made.     

THE EFFECT OF PROJECT RISK ON CAPITAL RATIONING UNDER UNCERTAINTY

The purpose of this paper is to investigate the effect of project risk on capital rationing with uncertain budgetary constraints. We reflect project risk by the standard deviation of cash flows. The problem is formulated in a stochastic linear programming with simple recourse (SLPSR) framework. In a sample problem, we vary the level of project risk and allow the probability distribution for the right-hand side constraints to be either symmetric or left skewed. We demonstrate that SLPSR yields superior solutions to an equivalent deterministic formulation and that risk aside, the borrowing rate is an important factor in determining the optimal solution vector. Moreover, we show that low project risk can compensate for higher borrowing costs and that the presence or absence of probability distribution asymmetry may not be an important issue.     

THE ASSOCIATION BETWEEN THE USE OF SOPHISTICATED CAPITAL BUDGETING PRACTICES AND CORPORATE PERFORMANCE

Since the early 1950s, the academic community has tried lo convince corporate managers that there are sophisticated techniques that can improve the capital budgeting decision-making process. Over the years, many studies have documented a trend toward increasing business use of such sophisticated capital budgeting techniques. However, there is no clear evidence whether better performing companies are more likely to employ sophisticated capital budgeting processes than are lower performing companies. This study is an attempt to measure the relationship between capital budgeting sophistication and business performance. It advances upon earlier studies by utilizing a more comprehensive capital budgeting sophistication metric, incorporating industry-adjusted independent variables (firm size, risk, capital intensity, and degree of focus), and by focusing on United States corporations. The results are similar with those of earlier studies; there is no discernible relationship between capital budgeting sophistication and corporate performance.     

国内ABS树脂市场分析

国内ＡＢＳ生产能力２０００年可达６０万,ｔ以上,总量缺口减少,结构性矛盾突出,年进口量保持在１００万ｔ左右,目前国和通用牌号价格低于制造成本,新产品开发滞后,缺乏特殊牌号,建议形成整体竞争优势,遏制低价倾销。     

EXPLAINING FIRM CAPITAL STRUCTURE: THE ROLE OF AGENCY THEORY VS. TRANSACTION COST ECONOMICS

The study of capital structure has increasingly gained importance in strategic management research. Paradigms derived from organizational economics have also gained popularity in explaining firm actions. Agency theory and transaction cost economics represent two such paradigms that rely on the notion of market imperfections. Notwithstanding the similarities between them, these two offer different explanations of the role of debt and equity in a firm. The governance abilities of the financing structures and the nature of assets of the firm provide two key sources of differences. Viewing capital structure from transaction cost economics gives rise to predictions that are contradictory to those presented by agency theory. It is argued that the extant evidence mainly supports the transaction cost viewpoint. Two organizational phenomena—leveraged buyouts and product diversification—are used to highlight the comparison.     

包装安全而战

这里不会发生! Converting杂志报道假冒伪劣产品,已经是第三个年头了.有关部门正采取了越来越多的措施来预防上述悲剧的发生,但仍然还有许多工作需要去完成.