In our model multiple innovators compete against each other by submitting investment proposals to an investor. The investor chooses the least expensive proposal and the timing of the investment. Innovators have to provide costly, but observable effort and they learn privately the cost of...

One of the common issues in Valuation in emerging markets is the choice of the currency for the Valuation and how it affects the inputs. Very often, multinational companies, when valuing an investment or an acquisition in an emerging market, are required to express expected cash flows in a...

Existing models of the size and scope of investment activity traditionally assume an infinite pool of ex-ante identical projects, despite the fact that managers often face a limited choice of projects that vary in quality. In this paper, we investigate optimal project selection in a model in...

Two criteria for choosing between capital investment projects are net present value (NPV) and internal rate of return (IRR). Sometimes they provide inconsistent rankings. This inconsistency sparked a debate about which criterion is better. The debate has lasted more than 100 years.This paper...

In the maturing Private Equity industry, investments where the Private Equity fund owns a minority of the equity – as a different form of investment – are gaining influence. Those minority investments use different instruments for value creation than classic majority investments and involve...

This study investigates the connection between private equity funds and business budgeting. The study is based on the data from SEAF South Balkan Fund B.V., a private equity fund, which, during the 2006 to 2010 period, analyzed 483 companies in Serbia. To that end, the first part of the study...

The internal rate of return (IRR) is widely used in Private Finance Initiative (PFI) schemes in the UK for measuring performance. However, it is well-known that the IRR may be a misleading indicator of economic profitability. Treasury Guidance (2004) recognizes that the IRR should not be used...

Against the backdrop of an ever-changing financial landscape sometimes characterized by an abundance of funding and start-up opportunities, but usually characterized by down rounds and decreasing valuations (leading to funding, investment and liquidity gaps), “venture capital” has taken on a...

We discuss how Contingent Payment Mechanisms (also known as Contingent Earn-Outs) enable of Entrepreneurial Financing decisions. First, we introduce a taxonomy of contingent payment mechanisms, by combining features regarding their term and amount. Second, we introduce each of these alternative...