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.     

Money,nonconvex preferences,and the existence of equilibrium: A note

Nonconvexities play a major role in several theories of money. This note suggests an additional such role. In particular, an economy is presented which fails to have a competitive equilibrium in the absence of fiat money. When fiat money is present, a steady-state competitive, equilibrium does exist and has the feature that money necessarily has value. This is because in any steady state, monetary equilibrium relative prices are bounded in such a way that the discontinuous portions of excess demand functions may become irrelevant.     

Implementing business ethics: Sexual harassment

Sexual harassment is a problem for many organizations. Organizations must understand that sexual harassment lies within the broader context of sex discrimination and inequality of opportunity in the workplace. Sexual harassment is both an illegal and unethical practice. Companies need to implement a policy which respects the rights of individual employees by prohibiting sexual harassment. This policy need to be clearly stated in the company Code of Ethics and enforced rigorously.Karen A. Crain is a Territory Representative for Wyeth-Ayerst Laboratories pharmaceutical company. She has published in a recent Proceeding of the International Conference of theAcademy of Business Administration.Kenneth A. Heischmidt is a Professor of Marketing at Southeast Missouri State University and has published in various professional journals and conferences includingJournal of Advertising, Journal of Professional Services Marketing, Journal of Hospital Marketing, Health Marketing Quarterly andJournal of Education for Business. He has received best paper awards at both the American Marketing Association and the Academy of Business Administration conferences.     

Retail Strategies on the Web: Price and Non–price Competition in the Online Book Industry

Two conflicting predictions have emerged regarding the effect of low–cost information on price. The first states that all Internet retailers will charge the same low price for mass produced goods. The second states that Internet retailers will differentiate to avoid intense price competition. Using data collected in April 1999 on the prices of 107 books in thirteen online and two physical bookstores, we find similar average prices online and in physical stores and substantial price dispersion online. Analysis of product differentiation yields no clear results. The substantial premium charged by Amazon provides indirect evidence of product differentiation.     

Uncertainty orientation: Expalaining diffeerences in purchase involvement and external search

This study incorporates uncertainty orientation, an individual difference variable concerned with cognitive response to uncertainty, and purchase involvement in a multiple indicator model of consumer external search activity. The model is tested using partial least squares in two contexts: for durable purchase decisions. Purchase involvement was found to be a multidimensional construct and only the experienced purchaserisk dimension was captured in the measurement models. For durables, uncertainty-oriented consumers experienced greater purchase risk and engaged in greater external seach than certainty-oriented consumers. For nondurables, uncertainty-oriented consumers experienced lower purchase risk than certainty-oriented consumers. Although the results are modest, they suggest that uncertainty orientation might be fruitfully examined in other applied contexts. © 1994 John Wiley & Sons, Inc.     

Family‐friendly work practices in Britain: Availability and perceived accessibility

Using linked data for British workplaces and employees, we find a low base rate of workplace‐level availability, and a substantially lower rate of individual‐level perceived accessibility, for five family‐friendly work practices' parental leave, paid leave, job sharing, subsidized child care, and working at home. Our results demonstrate that statistics on workplace availability drastically overstate the extent to which employees perceive that family‐friendly policies are accessible to them personally. British workplaces appear to be responding slowly, and perhaps disingenuously, to pressures to enhance family‐friendly work practices. © 2006 Wiley Periodicals, Inc.     

Incentives for Managing Accounting Information: Property-Liability Insurer Stock-Charter Conversions

Incentives to manage accounting information are examined within 63 property‐liability insurance company conversions from mutual ownership to common stock charter. In the conversion process, policyholders' embedded equity claims must be valued. Since mutuals have no separately traded equity, accounting numbers are a critical input in this valuation. Incentives for surplus management vary across firms; the strongest evidence of surplus management is observed among firms where the mutual's executives become the firm's principal stockholders following conversion. The evidence suggests that converting firms manage accounting information primarily by adjusting liabilities and selectively establishing investment losses—not by altering claims settlement policy.