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Capital Budgeting in Arbitrage-Free Markets

Laitenberger, Jörg; Löffler, Andreas - 2002

. In this paper we establish a theory that relates this approach to the assumption that markets are free of arbitrage. Our …

Persistent link: https://www.econbiz.de/10010317610

Marginal versus average beta of equity under corporate taxation

Lund, Diderik - 2009

Even for fully equity-financed firms there may be substantial effects of taxation on the after-tax cost of capital. Among the few studies of these effects, even fewer identify all effects correctly. When marginal investment is taxed together with inframarginal, marginal beta differs from average...

Persistent link: https://www.econbiz.de/10010285573

Yes, we should discount the far-distant future at its lowest possible rate: a resolution of the Weitzman-Gollier puzzle

Freeman, Mark C. - 2009

In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the...

Persistent link: https://www.econbiz.de/10010299168

A Monte Carlo Comparison between the Free Cash Flow and Discounted Cash Flow Approaches

Akalu, Mehari Mekonnen; Turner, Rodney - 2002

paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less …

Persistent link: https://www.econbiz.de/10010324971

Evaluating the Capacity of Standard Investment Appraisal Methods

Akalu, Mehari Mekonnen - 2002

The survey findings indicate the existence of gap between theory and practice of capital budgeting. Standard appraisal …

Persistent link: https://www.econbiz.de/10010325018

DCF

Kruschwitz, Lutz; Löffler, Andreas - 2002

Diese Diskussionsarbeit stellt einen wichtigen Baustein zu einer geplanten Monographie über die Theorie der DCF … nicht auf einem stringenten Konzept des Begriffes Kapitalkosten. In dieser Monografie werden Kapitalkosten als bedingte … mehrfacher Hinsicht unvollständig. Sie konzentriert sich erstens auf risikoloses Fremdkapital, was zwar einer in der Theorie der …

Persistent link: https://www.econbiz.de/10010317616

A stochastic Gordon-Shapiro formula with excess volatility

Kruschwitz, Lutz; Löffler, Andreas - 2020

It is well-known that stock prices fluctuate far more than dividends. Traditional valuation methods are not able to depict this fact. In this paper we incorporate excess volatility into a simple DCF model by considering an autoregressive cash flows process with random coefficients. We show that...

Persistent link: https://www.econbiz.de/10012230962

The Economic Opportunity Cost of Capital for Canada - An Empirical Update

Jenkins, Glenn; Kuo, Chun-Yan - 2007

The social or economic discount rate is the threshold rate used to calculate the net present value of an investment project, a program, or a regulatory intervention to see whether the proposed expenditures are economically worthwhile to undertake. The size of the economic rate of discount has...

Persistent link: https://www.econbiz.de/10011940747

Dividend taxation, share repurchases and the equity trap

Lindhe, Tobias; Södersten, Jan - 2009

This paper reconsiders the effects of dividend taxation. Particular attention is paid to the form of the equity trap, that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn's (1991) criticism of the well-known King and Fullerton (1984)...

Persistent link: https://www.econbiz.de/10010267266

Investment, protection, ownership, and the cost of capital

Himmelberg, Charles P.; Hubbard, R. Glenn; Love, Inessa - 2002

We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor...

Persistent link: https://www.econbiz.de/10011506547