Proper Valuation Research Articles

Market-based IRP: It's easy!!!

Making incorrect decisions in this period of restructuring transition could leave utilities with more inefficient plant or costly purchased-power contracts, either of which will increase stranded investment problems. Proper market-based valuation is not just a monopoly-based IRP issue: It affects decision making in a competitive environment even more profoundly.

International Economic Transactions: Issues in Measurement and Empirical Research.

This paper summarizes a forthcoming book that describes issues and recent innovations in the measurement of international transactions. A number of distinguished authors assess data measuring trade in merchandise, services, and foreign-direct investment claims. Others assess international prices and data measuring comparisons of inputs and outputs internationally. (International financial data are not assessed.) The chapters in many cases tabulate the data and illustrate their application to recent research questions. U.S. international data are emphasized, but those of other countries are frequently highlighted as well. Growing international interdependence and structural and technological change raise a number of important theoretical and measurement issues that are explored here with regard, for example, to computer prices, productivity, international convergence of income, service provision from overseas affiliates, and proper valuation of direct investment stakes.

Life-cycle valuation of social security and pension wealth

The proper valuation of annuity wealth is important for many empirical studies of economic behavior and the distribution of wealth and well-being. This paper examines Bernheim's argument that the value of Social Security benefit streams should be determined by simple discounting, rather than by actuarial discounting, when consumers behave according to life-cycle principles. In a model having a more realistic mortality structure than his, we document the poor performance of both methods for a broad range of parameter values.

Family Law: Equitable Distribution and Proper Valuation of Marital Property

Family Law: Equitable Distribution and Proper Valuation of Marital Property

Security‐holder cash flows and the valuation of corporate investment projects

AbstractThe difference between adjusted present value and cost‐of‐capital discounting procedures for evaluating corporate real‐asset investment projects is re‐examined. The two approaches are shown to contain different implicit assumptions about the distribution of project cash flows to security‐holders. The consequences thereof for the proper valuation of individual projects in the context of a multiproject investment plan are considered.

Topologies Extending Valuations

Let K be a field complete for a proper valuation (absolute value) v. It is classic that a finite-dimensional K-vector space E admits a unique Hausdorff topology making it a topological K-vector space, and that that topology is the “cartesian product topology” in the sense that for any basis c1 …, cn of E, is a topological isomorphism from K n to E [1, Chap. I, § 2, no. 3; 2, Chap. VI, § 5, no. 2]. It follows readily that any multilinear mapping from E m to a Hausdorff topological K-vector space is continuous. In particular, any multiplication on E making it a K-algebra is continuous in both variables. If for some such multiplication E is a field extension of K, then by valuation theory the unique Hausdorff topology of E is given by a valuation (absolute value) extending v.

STOCK PRICE DEPENDENCIES AND THE VALUATION OF RISKY ASSETS WITH DISCONTINUOUS TEMPORAL RETURNS

The traditional valuation formula for a future stream of uncertain returns discounts expected return in each period by a risk-adjusted opportunity rate. The value of risky asset is calculated in terms of first period or present value dollars. However, a valuation problem arises as time passes if uncertain returns of risky asset are temporarily discontinuous-that is, if a number of time periods pass between initial capital investment and generation of uncertain dollar returns. Then what is appropriate market worth of risky asset during temporal discontinuity periods? Several authors have commented on proper valuation procedure during discontinuity years. In [6], Robichek and Myers state that, under certain conditions, projects which resolve none of their risk over an interval of time will increase in value at risk free rate during this interval. They present an example of a ship leaving on a two year voyage. At embarkation, there is uncertainty regarding monetary proceeds that ship will carry upon its return. As there is no news of ship during its journey, this uncertainty is not resolved until date when ship returns to port. The authors state that if the ship owner's risk attitudes and interest rate are unchanged,' value of ship will increase at riskless rate over first year (the discontinuity period). That is, income will have been realized only at rate i during this year. The ship owner will continue to realize income at this rate until ship returns. This income is due strictly to passage of time-a reward for waiting. The part of total expected income due to risk bearing will be realized only when ship returns and value of cargo is known.2 In a more recent paper, Weingartner [7] proposes a space ship venture which is similar to hypothetical ship of Robichek and Myers. A space craft leaves Earth today and plans to return with uncertain proceeds in distant future. Weingartner assumes that no information concerning

Applications of Engineering Valuations in Management

Introduction One of the most important decisions which the management of a corporation is called upon to make involves the investment of company funds to produce maximum benefit for the stockholders. Generally, this is not a one-time decision which can be made and then forgotten, as new funds are constantly being generated which require investment; and new investment opportunities are developing which require funds. In arriving at these investment decisions and in balancing the flow of earnings with the opportunities for investment, the valuation of the proposed investment represents the basic data which are available in management. In a producing company, this valuation is generally of an engineering type. The engineering valuation should encompass every phase of a company's operation. It should provide the information with which management can measure and compare new investments but also should measure existing investments and operations. Management depends to a very large degree upon their technical staffs for new ideas and new opportunities, both in investments and in improving the return on existing investments through improved operation. Even the simplest type of engineering valuation requires consideration of a multitude of factors. Extremely complex is valuation of new construction in which the income resulting from the investment is related to the operation and income of a number of facilities. But management must have valuations to act as guides at each step in the road. In construction, not only must the physical equipment be properly selected, but the size must be chosen to strike a proper balance between rate of income and initial investment. The effect of the new construction on the income of existing or anticipated other equipment must be analyzed and included in the valuation. Investments and Engineering Valuations From this discussion, it can be seen that the management of any profit-conscious corporation must lean heavily upon engineering valuations in arriving at decisions on all types of investments. The very large number of points which must be included serves to emphasize the importance of and the reliance placed upon a proper valuation. But there is also one factor which should not be included. That is the safety factor.

The Choice of Capitalization Ratios in Practice

Problems of value and valuation have created one of the most fertile fields for discussion to be found in the realms of economics and business. Despite the fact that the determination of value is the core thought of economics and business, there is probably no one topic about which there is less unanimity of opinion. Students of economic theory and business problems need no reminder of this fact; others need only to look at the table of contents of Bonbright's monumental treatise, The Valuation of Property,l to be convinced. This paper treats of the problem of valuing a production unit, a bundle of production factors organized as a business concern. As indicated by the title, the paper discusses one specific method of arriving at the desired valuation, i.e., capitalization of earnings. No attempt will be made here to discuss the relative merits of this procedure as opposed to some other, for such discussion the reader is referred to Bonbright's work already cited.2 However, as Bonbright points out, the most unsettled question in the field relates to the proper rate applicable to the anticipated earnings in arriving at the proper valuation. The rates used by the Securities and Exchange Commission in their advisory opinions issued pursuant to the discharge of their duties under the Chandler Act3 will serve as the core of the paper; rates applied in other instances will also be observed.

Wholesome Co-operation

The American College of Surgeons has recently undertaken a movement which has a significant bearing upon the future progress of radiology in its relation to the treatment of cancer. For the first time in our history this subject will be taken up seriously by a group of men whom we may well consider leaders in scientific medicine, and it is not too much to hope that in the very near future they will assist us to place the proper valuation upon the rôle which radiation therapy essays in the field of therapeutic endeavor. Such a move is of tremendous importance, not alone to us radiologists but, most of all, to that vast clientele of human beings who rightfully look to the medical profession for relief from the most terrible and relentless enemy of mankind—cancer. It is a well known fact that the number of hospital treatment centers where radiation therapy is adequately available is extremely small, and consequently reliable radiation statistics are in no manner comparable with those of surgery. Now, however, if the writer's information is reliable, the American College of Surgeons proposes to enhance the opportunity for improvement of the radiological departments of the hospitals by concentration of cancer cases, consultation with special staff groups, stimulation of research, and by making available the methods and results of standard group practices in other institutions. To this end cancer committees or cancer clinics will be encouraged in such institutions, where the radiologist will be given equal opportunity with the surgeon to study out the proper procedure for the diagnosis and treatment plan of the individual patient. The writer feels that this is the most portentous movement inaugurated in recent years, and he believes that every earnest radiologist will gladly seize upon this opportunity and do his utmost to co-operate in this altruistic work. To single out one field where surgery and radiology must soon reach an understanding, cancer of the breast is suggested as the one which offers the most debatable ground. The operative treatment of cancer of the breast has now been practically standardized; that is, it is generally recognized that anything short of total extirpation, with a clean dissection of all accessible lymphatic structures, is useless. Has radiation treatment for the same condition been equally standardized? By no means. Radiologists are not at all in accord as to what constitutes a total sterilization dose or a total cancer dose, neither have they agreed as to what constitutes an ideal X-ray procedure even with the available measurable factors, such as voltage, milliamperage, distance, filter, time, etc., nor has it been possible as yet with radium to accept a standard known to be sufficient, accurate, and ideal.