Duality Results for Discrete Capital Budgeting Models

The application of linear and non-linear programming duality theory to capital budgeting models had resulted in the identification of various properties of optimal solutions and has provided economic interpretations of the models. This paper illustrates that similar results may be obtained for discrete capital budgeting models by applying recent advances in duality theory for integer programming problems (1), (2), and (3).In addition, a dual solution method is developed that permits a degree of decentralization of a firm's capital budgeting decision.     

Determinants of Cross-Sectional Variation in Discount Rates, Growth Rates and Exit Cap Rates

This study investigates the determinants of key input variables in valuers' discounted cash flow models used for estimating market values for offices. Data from 599 valuations in 2000 from Stockholm, Gothenburg and Malmö are used to explain variation in discount rates, expected growth rates in net operating income and exit cap rates. Our ability to explain the relatively wide variation in appraisal assumptions with plausible covariates generates confidence in the appraisal process. This has important implications because most value and returns indices of commercial real estate worldwide are appraisal based.     

Models for Cash Flow Estimation in Capital Budgeting

This paper discusses a fundamental change that appears to be occurring in the practical and theoretical aspects of engineering economy. Recent emphasis on the engineer's role in strategic and design-related decision processes has created a very real need for a change in focus in engineering economy technique and methodology. Several areas of research opportunity that arise because of the paradigm shift are also identified herein.     

A Robust Optimization Approach to Capital Rationing and Capital Budgeting

We study the pure capital rationing and the horizon capital budgeting problems using a robust optimization framework. The models and the methodology we propose take into account the uncertainty of the input data. The uncertainty of the cash flows is modeled as a range of values that is allowed for each uncertain data. Unlike stochastic models, this approach does not make assumptions on the probability distribution of uncertain data. Moreover, this approach is highly tractable, easy to implement, and provides insights into portfolio selection problems. An attractive point of the model is that the decision maker can set the value of the parameters that control the robustness of the optimal solution, in order to balance the trade-off between protection level and performance. We illustrate our models with examples that show promising results. We also provide new duality and KKT optimality conditions.     

REIT Capital Budgeting and Equity Marginal q

Equity marginal  q  is the change in the market value of a company's equity in response to a one-unit unexpected change in its asset base. Hence, it is a profitability index that evaluates a firm's capital budgeting decisions at the margin. We estimate the equity marginal  q  for real estate–managing public corporations, namely, real estate investment trusts (REITs), in an attempt to understand how the various costs and benefits of being a public corporation play a role in managing this important asset class. Using the universe of equity REITs for the period from 1993 to 2005, we find that REITs with greater idiosyncratic volatility, higher stock turnover and smaller bid-ask spread have a higher equity marginal  q . In addition, both the holdings of institutional investors and their investment horizons are respectively positively related to equity marginal  q.  With these firm characteristics taken into account, firm size is found to be negatively related to equity marginal  q . Our findings are economically important as well, because the equity marginal  q  ratio alone accounts for approximately one-third of the total REIT shareholder wealth change during the study period.     

An Approach to the Capital Budgeting Problem with Multiple Objectives

This paper describes a course in Engineering Economy which has been taught at Bradford for twenty years. It employs a variety of teaching methods to meet the preferred learning styles of students with different personality profiles and rt enables them to develop by passing through all four quadrants of the Experiential Learning Cycle. To facilitate this process, a novel business game has been invented which allows the Net Present Value of a project to be calculated quickly. Working as teams, students can thereby appraise the economic merits of a capital project as it proceeds through the various stages of its life cycle. The derivation of this model is provided herein with a few examples of the memoranda which enable the game to develop in a realistic way and by applying sequential decisions.     

A Solution Methodology for Probabilistic Capital Budgeting Problems Using Complex Utility Functions

Historically, the study of economic equipment replacement is primarily limited to that of a single machine or a single machining system. The replacement situation whereby machines under consideration are part of a large integrated system has received little attention. This paper proposes a framework, for the analysis of multiple-machine replacement within an integrated system context. The major difficulty of analyzing such a problem lies in the interactive nature of an integrated system; that is, how should the effects to the entire system be assessed as a result of alterations to one or more of its components. The emphasis of this work is on the issues regarding multiple machine replacement. A single-period model is utilized in order to simplify the presentation. A comprehensive example is also provided for illustration.     

风险贴现率法在工程项目风险决策分析中的运用

风险贴现率法是风险决策分析中常用的方法。章根据工程项目的特点，论述了在工程项目决策中引入风险贴现率法的可能性，以及针对实际情况调整风险贴现率的几种方法，同时也指出了风险贴现率法的局限性。     

Borrowing Interest Rate as a Function of the Debt-Equity Ratio in Capital Budgeting Models

This research extends Weingartner's basic horizon model by letting the borrowing terest rate vary from period to period as a function of the debt-equity ratio. blicly available data for two industries are used to obtain the function. Two models 2 developed: a non-convex nonlinear programming problem, which is solved by the oke and Jeeves algorithm; and an iterative linear model. It is concluded that either del can be used to represent the relationship between borrowing interest rate and Dt-equity ratio in the context of the capital budgeting problem.     

井下作业基础预算的可行性及特殊性

作业基础预算是将全面质量管理与作业管理相结合的动态预算管理模式。针对煤矿井下生产成本发生的特点,探讨了煤矿井下生产应用作业基础预算的可行性及特殊性。     

Capital Budgeting Practices for R&D: A Survey and Analysis of Business Week's R&D Scoreboard

This paper discusses results of a survey of U.S. Corporations regarding the extent of the utilization of standard capital budgeting measures of investment worth to evaluate R&D projects. This study analyzes responses by three types of R&D activity: Basic, Applied and Development research. The results indicate that discounted cash flow methods are widely utilized in the evaluation of Development projects, and the analysis of Development projects is as sophisticated as the evaluation of non-R&D projects. The use of discounted cash flow analysis techniques for Applied projects is considerably less widespread than for Development projects. However, the utilization of Net Present Value and Internal Rate of Return increases with firm size. Basic research projects are much less likely to be subjected to a formal economic analysis and are generally thought of as being “strategic” investments. This research also indicates that post-audits of Applied and Development projects are based on economic measures, whereas Basic research projects focus on physical or operational goals. Lastly, this research indicates that most R&D projects are terminated because R&D priorities have changed rather than because they are not technically feasible.     

Derivation of Cost of Capital and Equity Rates from Market Data

Use of the discounted cash flow (DCF) technique in investment and appraisal situations depends on readily available and reliable estimates of cost of capital and equity rates. Previous research on estimating equity rates and cost of capital from financial data sources is extremely limited and includes no evidence on the consistency of rates derived from alternative data sources. This paper derives estimates of equity rates and cost of capital from three alternative commonly available data sources. Estimates are derived separately for operating properties and for homebuilder/land developers on both a before- and after-corporate tax basis. The alternative data sources are found to yield consistent and reliable estimates of equity rates and cost of capital. Rates estimated from these sources are sufficiently accurate and reliable for most investment or appraisal applications.     

Product Market Volatility and the Adjustment of Earnings to Risk

This investigation of compensating wage differentials uses an instrument for the risk of unemployment, namely, the industry-specific shipment volatility, to address some empirical anomalies found in the literature. I find that risk premiums for the risk of unemployment range from 8.5 to 19 percent when the covariance between shipment volatility and total manufacturing employment is taken into account. Covariance risk requires positive premiums that range from 1.4 to 14 percent depending on the specification.     

企业集团资本多元结构的调整与优化分析

通过分析现代资产组合理论与企业集团资本经营研究对象的差异,指出资产组合理论在企业资本运营中的“盲点”,分析阐述了资本流动及资本结构的调整优化对建立企业集团战略性竞争优势的重要意义。     

Labor Contract Duration,Indexation, and Wage Adjustment: Interdependence and Inflation Propagation Mechanisms

We study simultaneously the three main outcomes of collective bargaining negotiations, namely indexation, non‐indexed wage adjustment, and contract duration. The wage adjustment equation accommodates varying degrees of wage indexation in the current and previous contracts. The elasticity of indexation, a latent variable, deals with both the incidence and intensity of wage indexation and links consistently with the wage equation. Duration, which may change between contracts, is shown to depend on indexed and non‐indexed wage adjustment, obviating the need for expected inflation in the empirical duration equations of earlier work. Complex intra‐ and inter‐contract inflation propagation mechanisms involve expected inflation and inflation uncertainty in an essential way. The model accounts for the secular doubling of contract duration and dramatic decrease in indexation and non‐contingent wage adjustment.     

信用风险监管资本测度优化

在巴塞尔新资本协议框架下的IRB模型基础上,通过违约相关性模型的推导,得出了降低信贷资产组合信用风险加权资产的一些有效途径;通过对同质类资产组合和异质类资产组合的风险集中度调整的方法,提出了风险分散的具体路径;通过由银行的资本总成本最小化约束模型和监管者破产银行数目最小化约束模型联合组成的激励相容模型,将银行出于内部风险管理目的而计算出来的风险价值,同监管当局出于监管目的而要求银行确定的监管资本有效地联系起来。     

Effective Property Tax Rates and Capital Formation Issues: Manvel, Acton and Darby

Using comparatively new data sources, this study estimates that effective property tax rates on taxable capital declined nearly 50% in the U.S. during the decade of the 1970s, a phenomenon generally overlooked or understated in previous studies. Recognition of this halving of property tax rates permits at least a partial explanation for a number of otherwise unexplained macroeconomic occurrences during the 1970s, particularly the smaller-than-anticipated interactive effects of inflation and the income tax on interest rates, on the one hand, and on capital allocation, on the other. The clear implication is that greater attention must be paid to trends in effective property tax rates in understanding and predicting important economic behavior.