“Preparing” the Equity Market for Adverse Corporate Events: A Theoretical Analysis of Firms Cutting Dividends

2012 ◽  
Vol 47 (5) ◽  
pp. 933-972 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
Xuan Tian
Keyword(s):  
Theoretical Analysis ◽  
Private Information ◽  
Net Present Value ◽  
Equity Market ◽  
Present Value ◽  
Financial Difficulties ◽  
Growth Opportunity ◽  
Growth Prospects ◽  
Dividend Cuts

AbstractThis paper presents the first theoretical analysis of the choice of firms between “preparing” and not preparing the equity market in advance of a possible dividend cut. In our model, insiders have private information about their firm’s intermediate cash flow as well as about the net present value of its growth opportunity. We show that, in equilibrium, firms in temporary financial difficulties but with good long-term growth prospects are more likely to prepare the market in advance of dividend cuts, while those with permanently declining earnings are less likely to prepare the market. Our model generates several new testable predictions.

Creating continuous areas of old forest in long-term forest planning

2000 ◽  
Vol 30 (11) ◽  
pp. 1817-1823 ◽  
Author(s):  
Karin Öhman
Keyword(s):  
Net Present Value ◽  
Problem Formulation ◽  
Core Area ◽  
Northern Sweden ◽  
Present Value ◽  
The Core ◽  
Long Range Planning ◽  
The Cost

Harvest activities tend often to create landscapes where the old forest is fragmented into isolated patches that provide marginal conditions for species that inhabit forest interiors. This paper presents a long-range planning model designed to maximize the net present value and to create continuous patches of old forest. In this model, the spatial structure of old forest is controlled by core area and edge habitats. Core area is defined as the area of old forest that is free of edge effects from surrounding habitats. The core area requirement is set to a fixed value for each of a number of time periods, whereas the area of edge habitats, which should be as small as possible, is weighted against the net present value. The model is applied in a case study to an actual landscape consisting of 755 stands of forest in northern Sweden and solved using simulated annealing. The results show that distinct continuous patches of old forest are created when both a core area requirement and consideration of the amount of edge habitats are included in the problem formulation. The cost of creating continuous areas of old forest was found to be significant.

scholarly journals An evaluation of the economic viability of environmental offsets in the saltworks industry

2020 ◽  
Vol 50 (5) ◽  
Author(s):  
Rogério Taygra Vasconcelos Fernandes ◽  
Aruza Rayana Morais Pinto ◽  
Raimunda Thyciana Vasconcelos Fernandes ◽  
Jônnata Fernandes de Oliveira ◽  
José Luís Costa Novaes
Keyword(s):  
Economic Impact ◽  
Net Present Value ◽  
Economic Viability ◽  
Attractive Alternative ◽  
Present Value ◽  
Conservation Units ◽  
Productive Area ◽  
Solar Saltworks ◽  
Do So

ABSTRACT: The extraction of sea salt depends on the occupation of large areas at the estuary banks, many of them inserted in Permanent Preservation Areas (PPAs). Thus, the objective was to evaluate the economic viability of Environmental Offsets (EO) as an alternative to the unoccupied PPAs in the saltworks. In order to do so, 27 solar saltworks installed in the region of the Brazilian White Coast were evaluated for the occupation of PPAs - measured using images from satellite, georeferenced, vectored with corresponding PPA bands generated - and estimated to EO (Impact Degree x Sum of the investments necessary to implement the project) and Economic Impact (Net Present Value, with long-term interest rate of 7%) of vacating PPAs. It was considered that EO was feasible whenever the costs resulting from it were lower than the economic impact caused by the vacancy of the PPAs. The PPAs were tthe productive area of the saltworksthat occupied 13.70% of PPAs. For all the evaluated enterprises the value corresponding to EO was lower than the Economic Impact resulting from the vacancy of the PPAs. Thus, EO is an economically viable and more attractive alternative to the eviction of PPAs by the saltworks industry and may also provide environmental gains due to the financing of conservation units in the areas of influence of the enterprises. However, there is a need to improve the methodology used to estimate the EO, since a maximum limit is set, the environmental impacts caused by the projects are underestimated.

Changeability as an alternative to traditional design

2019 ◽  
Author(s):  
Daniel F. Villarraga ◽  
Samuel Torres Rincón ◽  
Mauricio Sánchez Silva
Keyword(s):  
Net Present Value ◽  
Financial Economic ◽  
Present Value ◽  
Significant Modification ◽  
Significant Cost ◽  
Adverse Conditions ◽  
Traditional Design ◽  
Design Alternatives ◽  
Physical Level

<p>The built environment is subject to multiple uncertainties, therefore, any investment in building assets is risky at a financial, economic and/or physical level. Traditionally, engineers deal with this problem by designing and constructing systems capable to accommodate expected long-term demands without any significant modification to their structure. However, this strategy comes at a significant cost and implies that the system is overdesign during most of its lifetime. An alternative to this approach is conceiving systems that can change over time, so they are capable to overcome adverse conditions and take benefit from emerging opportunities. In this paper we describe how enabling change improves systems’ economic performance. In the paper, the consequences of changeability are evaluated with respect to the systems’ expected net present value and its variance; this is compared with the traditional financial evaluation of traditional alternatives. This work is a step forward towards understanding of changeability and its advantages over traditional design alternatives.</p>

scholarly journals Bioeconomic multistock reference points as a tool for overcoming the drawbacks of the landing obligation

2016 ◽  
Vol 74 (2) ◽  
pp. 511-524 ◽  
Author(s):  
Dorleta García ◽  
Raúl Prellezo ◽  
Paz Sampedro ◽  
José María Da-Rocha ◽  
José Castro ◽  
...  
Keyword(s):  
Economic Performance ◽  
Net Present Value ◽  
Policy Reform ◽  
Maximum Sustainable Yield ◽  
Reference Points ◽  
Present Value ◽  
Fisheries Policy ◽  
Fleet Dynamics ◽  
The Impact

The landing obligation policy was one of the major innovations introduced in the last Common Fisheries Policy reform in Europe. It is foreseen that the policy will affect the use of fishing opportunities and hence the economic performance of the fleets. The problem with fishing opportunities could be solved if single-stock total allowable catches (TACs) could be achieved simultaneously for all the stocks. In this study, we evaluate the economic impact of the landing obligation policy on the Spanish demersal fleet operating in the Iberian Sea region. To generate TAC advice, we used two sets of maximum sustainable yield (MSY) reference points, the single-stock MSY reference points defined by ICES and a set of multistock reference points calculated simultaneously using a bioeconomic optimization model. We found that the impact of the landing obligation is time and fleet dependent and highly influenced by assumptions about fleet dynamics. At fishery level, multistock reference points mitigate the decrease in the net present value generated by the implementation of the landing obligation. However at fleet level, the effect depends on the fleet itself and the period. To ensure the optimum use of fishing opportunities, the landing obligation should be accompanied by a management system that guarantees consistency between single-stock TACs. In this regard, multistock reference points represent an improvement over those currently in use. However, further investigation is necessary to enhance performance both at fleet level and in the long term.

Robust Constrained Optimization of Short- and Long-Term Net Present Value for Closed-Loop Reservoir Management

SPE Journal ◽  
2012 ◽  
Vol 17 (03) ◽  
pp. 849-864 ◽  
Author(s):  
C.. Chen ◽  
G.. Li ◽  
A.C.. C. Reynolds
Keyword(s):  
Life Cycle ◽  
Net Present Value ◽  
Production Optimization ◽  
Nonlinear Constraints ◽  
Present Value ◽  
Short Term ◽  
Linear And Nonlinear Constraints ◽  
Linear And Nonlinear ◽  
Reservoir Description

Summary In this paper, we develop an efficient algorithm for production optimization under linear and nonlinear constraints and an uncertain reservoir description. The linear and nonlinear constraints are incorporated into the objective function using the augmented Lagrangian method, and the bound constraints are enforced using a gradient-projection trust-region method. Robust long-term optimization maximizes the expected life-cycle net present value (NPV) over a set of geological models, which represent the uncertainty in reservoir description. Because the life-cycle optimal controls may be in conflict with the operator's objective of maximizing short-time production, the method is adapted to maximize the expectation of short-term NPV over the next 1 or 2 years subject to the constraint that the life-cycle NPV will not be substantially decreased. The technique is applied to synthetic reservoir problems to demonstrate its efficiency and robustness. Experiments show that the field cannot always achieve the optimal NPV using the optimal well controls obtained on the basis of a single but uncertain reservoir model, whereas the application of robust optimization reduces this risk significantly. Experimental results also show that robust sequential optimization on each short-term period is not able to achieve an expected life-cycle NPV as high as that obtained with robust long-term optimization.

scholarly journals Emerging Capital Markets Development: A Case Study of Pakistani Equity Markets

2000 ◽  
Vol 39 (4II) ◽  
pp. 963-978 ◽  
Author(s):  
Syed Furqan Haider Shamsi ◽  
Nighat Bilgrami-jaffery
Keyword(s):  
Capital Markets ◽  
Equity Market ◽  
Stock Exchanges ◽  
Complex Structures ◽  
Growth Prospects ◽  
Emerging Capital Markets ◽  
Productive Assets ◽  
Effective Source

The purpose of the study is to trace and review the growth and development of the Pakistani Equity Market. The capital markets in Pakistan has been undergoing a major restructuring programme. Number of measures have been taken to liberalise investment procedures and encourage capital formation through stock exchanges, enlarge size and depth of capital markets. We are witnessing globally a remarkable pace of change from a social and economic perspective. Capital markets being driven by the floods of competition and technology are experiencing so many new challenges and changes inducing them to incline more towards complex structures which would not have been considered possible few time back. Capital markets play an important role in the economic development of emerging capital markets. These markets are an important and efficient conduit to channel and mobilise funds to enterprises, and provide an effective source of investment in the economies they serve. Well functioning markets ensure that both corporations and investors get or receive fair prices for their securities. Their role for mobilising savings for investment in productive assets is acute which subsequently enhance the country’s long term growth prospects. Therefore we can deduce here that their role is like a major catalyst for transformation of the country’s economy into a more efficient and competitive emporium within the global workroom.

scholarly journals Downscaling of Long-Term Global Scenarios to Regions with a Forest Sector Model

Forests ◽  
2020 ◽  
Vol 11 (5) ◽  
pp. 500
Author(s):  
Ljusk Ola Eriksson ◽  
Nicklas Forsell ◽  
Jeannette Eggers ◽  
Tord Snäll
Keyword(s):  
Net Present Value ◽  
Region Of Interest ◽  
Forest Sector ◽  
Present Value ◽  
Regional Study ◽  
Sector Model ◽  
Study Materials ◽  
Forest Policies ◽  
Framework Conditions

Research Highlights: Long-term global scenarios give insights on how social and economic developments and international agreements may impact land use, trade, product markets, and carbon balances. They form a valuable basis for forming national forest policies. Many aspects related to long-term management of forests and consequences for biodiversity and ecosystem services can only be addressed at regional and landscape levels. In order to be attended to in the policy process, there is a need for a method that downscales national scenarios to these finer levels. Background and Objectives: Regional framework conditions depend on management activities in the country as a whole. The aim of this study is to evaluate the use of a forest sector model (FSM) as a method for downscaling national scenarios results to regional level. The national FSM takes the global scenario data (e.g., harvest level and market prices over time) and solves the national problem. The result for the region of interest is taken as framework conditions for the regional study. Materials and Methods: Two different specifications are tested. One lets product volumes and prices represent endogenous variables in the FSM model. The other takes volumes and prices from the global scenario as exogenous parameters. The first specification attains a maximum net social payoff whereas the second specification means that net present value is maximized under a harvest constraint. Results: The maximum net social payoff specification conforms better to economic factors than the maximum net present value specification but could give national harvest volume trajectories that deviates from what is derived from the global model. This means that regional harvest activity can deviate considerably from the national average, attesting to the benefit of the use of the FSM-based method

scholarly journals SEQUENTIAL CAPITAL INVESTMENT DECISION MAKING UNDER EXTREME CASH FL OW SITUATIONS: EVIDENCE USING MONTE CARLO SIMULATION

2015 ◽  
Vol 16 (5) ◽  
pp. 877-900 ◽  
Author(s):  
Wenqing Zhang ◽  
Prasad Padmanabhan ◽  
Chia-Hsing Huang
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Capital Investment ◽  
Net Present Value ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Present Value ◽  
Short Term ◽  
Value Analysis

Uncertainty influences a decision maker's choices when making sequential capital investment decisions. With the possibility of extremely negative cash inflows, firms may need to curtail operations significantly. Traditional Net Present Value analysis does not allow for efficient management of these problems. In addition, firm managers may behave irrationally by accepting negative Net Present Value projects in the short term. This paper presents a Monte Carlo simulation based model to provide policy insights on how to incorporate extreme cash flows and manager irrationality scenarios into the capital budgeting process. This paper presents evidence that firms with irrational managers and experiencing extremely negative cash flows may, under certain conditions, reap long term rewards associated with the acceptance of negative Net Present Value projects in the short term. These benefits are largest if cost ratios (discount rates) are small, or investment horizons are high. We argue that acceptance of short term negative Net Present Value projects implies the purchase of a long term real option which can generate positive long term cash flows under certain conditions.

The Term Structure of Interest Rates and the Evaluation of Forestry Investments: A Note

1988 ◽  
Vol 12 (4) ◽  
pp. 256-258
Author(s):  
F. Christian Zinkhan
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Discount Rate ◽  
Net Present Value ◽  
Present Value ◽  
Term Structures ◽  
Forestry Investments ◽  
The Relationship

Abstract The forestry literature generally assumes that the appropriate discount rate to be used in the estimation of a given investment's net present value is the same over its lifetime. However, the values of many alternative investments such as stocks and bonds often reflect term structures that are not flat. That is, the relationship between the number of years to maturity of an investment and that investment's required rate of return is often a significant consideration. This note suggests a procedure for incorporating a consideration of the term structure of interest rates into the determination of a discount rate specific to each annual net cash flow associated with a given long-term forestry investment. Using an actual 10-year case analysis, it was found that the valuation of a timberland tract varied by approximately 11%, depending upon whether or not the term structure of interest rates was recognized. South. J. Appl. For. 12(4):256-258.

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