scholarly journals A Scorecard to Detect Financial Leverage Profitability

2018 ◽  
Vol 13 (3) ◽  
pp. 244
Author(s):  
Laura Broccardo ◽  
Luisa Tibiletti ◽  
Pertti Vilpas
Keyword(s):  
Net Present Value ◽  
Economic Value ◽  
Weighted Average ◽  
Cost Of Debt ◽  
Corporate Management ◽  
External Financing ◽  
Present Value ◽  
Financial Decisions ◽  
Proposed Model ◽  
The Cost

This study investigates how balancing internal and external financing sources can create economic value. We set a financial scorecard, consisting of the Cost of Debt (COD), Return on Investment (ROI), and the Cost of Equity (COE). We show that COE should be a cap for COD and a floor for ROI in order to increase the Net Present Value at Weighted Average Cost of Capital and the Adjusted Present Value of the levered investment. However, leverage should be carefully monitored if COD and ROI go off the grid. Situations where leverage has the opposite effect on value creation and the Equity Internal Rate of Return are also discussed. Illustrative examples are given. The proposed model aims to help corporate management in financial decisions.

Firm Growth and Disclosure: An Empirical Analysis

2006 ◽  
Vol 41 (2) ◽  
pp. 357-380 ◽  
Author(s):  
Inder K. Khurana ◽  
Raynolde Pereira ◽  
Xiumin Martin
Keyword(s):  
Firm Growth ◽  
Net Present Value ◽  
Theoretical Research ◽  
External Financing ◽  
Present Value ◽  
Firm Level ◽  
Disclosure Policy ◽  
Level Data ◽  
Agency Issues ◽  
The Cost

AbstractExtant theoretical research posits that information asymmetry and agency issues affect the cost of external financing and hence impact the ability of firms to finance their growth opportunities. In contrast, the literature on disclosure policy posits that expanded and credible disclosure lowers the cost of external financing and improves a firm's ability to pursue potentially profitable projects. An empirical implication is that disclosure can help firms grow by relaxing external financing constraints, thereby allowing capital to flow to positive net present value projects. This paper empirically evaluates this prediction using firm-level data over an 11-year period. As anticipated by theory, we find a positive relation between firm disclosure policy and the externally financed growth rate, after controlling for other influences.

scholarly journals Decision Making for Project Appraisal in Uncertain Environments: A Fuzzy-Possibilistic Approach of the Expanded NPV Method

Symmetry ◽  
2020 ◽  
Vol 13 (1) ◽  
pp. 27
Author(s):  
Konstantinos A. Chrysafis ◽  
Basil K. Papadopoulos
Keyword(s):  
Net Present Value ◽  
Fuzzy Numbers ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Present Value ◽  
Major Drawback ◽  
Project Appraisal ◽  
Equity Cost ◽  
Set Up ◽  
Intelligent Methods

The major drawback of the classic approaches for project appraisal is the lack of the possibility to handle change requests during the project’s life cycle. This fact incorporates the concept of uncertainty in the estimation of this investment’s worth. To resolve this issue, the authors use fuzzy numbers, possibilistic moments of fuzzy numbers and the hybrid (fuzzy statistic) fuzzy estimators’ method in order to introduce a fuzzy possibilistic version of the expanded net present value method (FPeNPV). This approach consists of two factors: the fuzzy possibilistic NPV and the fuzzy option premium. For the estimation of the fuzzy NPV, some basic assumptions are taken into consideration: (1) the opportunity cost of capital, used as the present value interest factor calculated through the weighted average cost of capital (WACC), (2) the equity cost, determined through the possibilistic set-up of the capital asset pricing model CAPM, and (3) the inflation factor, also included in the estimation of the NPV. The fuzzy estimators’ method is used for the computation of the fuzzy option premium. An algorithm of nine major steps leads to the computation of the FPeNPV. This gives the administration the opportunity to adapt to potential changes in the company’s internal and external environments. In this way, the symmetry between the planning and execution phase of a project can be reinstated. The results validate the statement that fuzzy and intelligent methods remain valuable tools to express uncertainty in various scientific areas. Finally, an illustrative example aims at a thorough comprehension of this new approach of the expanded NPV method.

scholarly journals Studi Kelayakan Ekonomis Rencana Pembangunan Pelabuhan Sungai Liong Desa Berancah Kabupaten Bengkalis

2019 ◽  
Vol 3 (2) ◽  
pp. 146
Author(s):  
Nur Rahmani ◽  
Akmal Lazuardy
Keyword(s):  
Net Present Value ◽  
Payback Period ◽  
Economic Feasibility ◽  
Rate Of Return ◽  
Cost Ratio ◽  
Internal Rate Of Return ◽  
Benefit Analysis ◽  
Present Value ◽  
The Government ◽  
The Cost

The fish shelter port (TPI) is a need that needs to be prepared by local village officials and the government for every coastal village in Bengkalis Regency. This research was conducted in the Berancah village of Bantan District. The analysis in this study describes the economic feasibility mathematically for the construction of a fish storage port (TPI) by calculating the cost ratio (B / C ratio) benefit analysis, payback period (PP), net present value (NPV), and internal rate of return ( IRR). The results obtained from the NPV value (3,661,267,645), BCR value (0.943), IRR value of 10.01%, and PP are in the period of 30 years. Taken as a whole by standardizing the calculations, it can be concluded that the planned construction of a fish shelter in Berancah village is considered not economically feasible, but economic analysis is not merely a benchmark for feasibility, reviewed for the future many benefits will be received by the community around the location of the development plan so that it can improve the welfare of the community in Berancah village.

scholarly journals Economic-Mathematical Model for Assessing the Sensitivity of International Innovation and Investment Projects

2019 ◽  
Vol 8 (12) ◽  
pp. 140-145
Keyword(s):  
Mathematical Model ◽  
International Business ◽  
Economic Efficiency ◽  
Net Present Value ◽  
Present Value ◽  
Investment Activity ◽  
Investment Projects ◽  
Internal Parameters ◽  
Proposed Model ◽  
Sensitivity Indicator

International innovation and investment activity occupy a special place in the system of modern international business. The authors propose an economic and mathematical model for assessing the sensitivity of international innovation and investment projects by the criterion of net present value. It is advised to use the obtained sensitivity indicator as an additional one in assessing the economic efficiency of international innovation and investment projects of an enterprise. The proposed model makes it possible to determine the effect of several internal parameters simultaneously on the net present value of the project.

scholarly journals Reinvestment Bias When Analyzing Mutually Exclusive Assets

2011 ◽  
Vol 2 (3) ◽  
pp. 71
Author(s):  
Robert J. Sweeney
Keyword(s):  
Net Present Value ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Internal Rate ◽  
Current Period ◽  
The Cost ◽  
Flows Over Time

Capital budgeting decisions generally involve the commitment of resources in the current period to secure positive cash flows over time that generate a rate of return in excess of the cost of the funds invested. The most common techniques used to perform this analysis are the Net Present Value (NPV) and the Internal Rate of Return (IRR).Conceptually, these two techniques are substitutable; i.e. the resulting decision from a NPV analysis is identical to the decision from an IRR analysis. In practice, however, the NPV and the IRR can, on occasion, produce conflicting decisions. Specifically, when analyzing mutually exclusive assets the Net Present Value can support one asset while the Internal Rate of Return supports the other. The purpose of this paper is twofold; first, to highlight structural deficiencies in the conventional application of the NPV and the IRR, and second, to demonstrate a procedure to correct for these structural errors.

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 VIABILIDADE ECONÔMICA DA PRODUÇÃO DE CARVÃO VEGETAL EM DOIS SISTEMAS PRODUTIVOS

FLORESTA ◽  
2014 ◽  
Vol 44 (1) ◽  
pp. 143 ◽  
Author(s):  
Aylson Costa Oliveira ◽  
Thiago Taglialegna Salles ◽  
Bárbara Luísa Corradi Pereira ◽  
Angélica De Cássia Oliveira Carneiro ◽  
Camila Soares Braga ◽  
...  
Keyword(s):  
Economic Analysis ◽  
Net Present Value ◽  
Production Systems ◽  
Planning Horizon ◽  
Economic Viability ◽  
Present Value ◽  
Charcoal Production ◽  
Average Annual Production ◽  
The Cost ◽  
Benefit Cost

O objetivo deste trabalho foi analisar a viabilidade econômica da produção de carvão vegetal em dois sistemas produtivos: oito fornos de superfície acoplados a uma fornalha para queima de gases e dez fornos do tipo “rabo-quente” sem sistema de queima de gases. Para análise econômica, definiu-se uma produção anual média igual a 1.571 metros cúbicos de carvão (mdc) e horizonte de planejamento de 12 anos, sendo propostos 2 cenários. No primeiro cenário, após a colheita da madeira, realiza-se o plantio de uma nova floresta, permanecendo o custo da madeira constante em todo o planejamento; no segundo cenário, após a colheita, considerou-se a condução da brotação, reduzindo os custos na 2ª rotação e consequentemente os custos da madeira. A análise econômica foi realizada através da determinação dos seguintes indicadores: Valor Presente Líquido (VPL), Valor Anual Equivalente (VAE), Razão Benefício/Custo (B/C) e Lucratividade. Os indicadores calculados demonstraram a viabilidade dos dois sistemas produtivos avaliados em ambos os cenários propostos, porém o sistema fornos-fornalha apresentou melhores valores para os indicadores. Conclui-se que a produção de carvão vegetal nos sistemas avaliados foram viáveis economicamente, com o sistema fornos-fornalha gerando maior lucro ao produtor de carvão.Palavras-chave: Fornos de alvenaria; análise determinística; valor presente líquido. Abstract Economic viability of charcoal production in two production systems. The objective of this study was to analyze the economic viability of charcoal production in two conversion technologies: eight surface kilns coupled to a furnace for burning gases (kilns-furnace system) and ten "rabo-quente" or traditional charcoal kilns without burning gases system. An average annual production of 1571 cubic meters of charcoal (mdc) was used to perform the economic analysis. A planning horizon of 12 years and two scenarios were proposed. In the first scenario, after harvesting the wood, the planting of a new forest was performed, and the cost of wood remained constant throughout the planning horizon. In the second scenario, after the harvest, the conduction of shooting was considered, which reduced costs in the second rotation and consequently the cost of wood. The economic analysis was performed by determining the following indicators: Net Present Value (NPV), Equivalent Annual Value (EAV) and Benefit - Cost Reason (B/C). Calculated indicators demonstrated the viability of producing charcoal in the two production systems in both scenarios proposed, but kilns-furnace system presented better values. As conclusion, production of charcoal in the evaluated systems were economically viable. Kilns-furnace system was able to generate more profit to charcoal producer.Keywords: Kilns; deterministic analysis; net present value.

scholarly journals Market value calculation and the solution of circularity between value and the weighted average cost of capital WACC

2009 ◽  
Vol 10 (6) ◽  
pp. 101-131 ◽  
Author(s):  
Ignacio Vélez-Pareja ◽  
Joseph Tham
Keyword(s):  
Average Cost ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Cost Of Debt ◽  
Cost Of Equity ◽  
Tax Rate ◽  
Market Values ◽  
Equity Cost ◽  
Tax Payments ◽  
The Cost

Most finance textbooks present the Weighted Average Cost of Capital (WACC) calculation as: WACC = Kd×(1-T)×D% + Ke×E%, where Kd is the cost of debt before taxes, T is the tax rate, D% is the percentage of debt on total value, Ke is the cost of equity and E% is the percentage of equity on total value. All of them precise (but not with enough emphasis) that the values to calculate D% y E% are market values. Although they devote special space and thought to calculate Kd and Ke, little effort is made to the correct calculation of market values. This means that there are several points that are not sufficiently dealt with: Market values, location in time, occurrence of tax payments, WACC changes in time and the circularity in calculating WACC. The purpose of this note is to clear up these ideas, solve the circularity problem and emphasize in some ideas that usually are looked over. Also, some suggestions are presented on how to calculate, or estimate, the equity cost of capital.

scholarly journals Estimating the aboveground carbon sequestration and its economic value (case study: Iranian Caspian forests)

2017 ◽  
Vol 63 (No. 11) ◽  
pp. 511-518 ◽  
Author(s):  
Mohammadi Zohreh ◽  
Limaei Soleiman Mohammadi ◽  
Lohmander Peter ◽  
Olsson Leif
Keyword(s):  
Carbon Sequestration ◽  
Net Present Value ◽  
Economic Value ◽  
Volume Growth ◽  
Allometric Equation ◽  
Present Value ◽  
Diameter Increment ◽  
Aboveground Carbon ◽  
The North ◽  
Annual Volume

The aim of the study is to estimate the aboveground carbon sequestration and to determine the economic value of forests in carbon sequestration as a way of mitigating climate change. This research was conducted at Asalem forests in the north of Iran. In order to estimate the amount of annual carbon sequestration, the annual volume growth of stand was determined using the diameter increment data and tariff. The amount of carbon sequestration was estimated based on wood density and using the allometric equation. The carbon model was obtained for each species. The value of sequestrated carbon in stumpage and the net present value of carbon sequestration were determined in order to estimate the economic value of carbon sequestration. Results indicated that the annual volume growth per hectare and the carbon stored are 6.023 m<sup>3</sup>·yr<sup>–1</sup> and 2.307 t·ha<sup>–1</sup>, respectively. Finally, the carbon sequestration value of stumpage and the net present value of carbon sequestration are 11,023.753 and 790.361 (10,000 IRR·t<sup>–1</sup>·ha<sup>–1</sup>), respectively. Our results are very useful in estimating the total economic value of Asalem forests and other Iranian Caspian forests in the future.

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