Practitioners and some academics use potential dividends rather than actual payments to shareholders for valuing a firm’s equity. We underline the differences between the two methods and present some arguments supporting the thesis that firm valuation with potential dividends overstate the...

The use of CAPM‐based disequilibrium betas and Net Present Value (NPV) for investment decisions and valuations is widespread in finance. Actually, its use is logically deducted from the CAPM assumptions. This paper deals with decisions about purchase of a firm and the related issue of firm...

In an interesting recent paper, DeAngelo and DeAngelo (2006) highlight that Miller and Modigliani's (1961) proof of dividend irrelevance is based on the assumption that the amount of dividends distributed to shareholders is equal or greater than the free cash flow generated by the fixed...

This paper deals with the use of the CAPM for investment decisions and evaluations. Four different measures are deductively drawn from this model: the disequilibrium Net Present Value, the equilibrium Net Present Value, the disequilibrium Net Future Value, the equilibrium Net Future Value. It is...

This paper presents a theoretical framework for valuation, investment decisions, and performance measurement based on a nonstandard theory of residual income. It is derived from the notion of "unrecovered" capital, which is here named "lost" capital because it represents the capital foregone by...

This paper presents a theoretical framework for valuation, investment decisions, and performance measurement based on a nonstandard theory of residual income. It is derived from the notion of "unrecovered" capital, which is here named "lost" capital because it represents the capital foregone by...

The adoption of a photovoltaic system has positive environmental effects, but the main driver of the choice in the industrial and commercial sector is economic profitability. Switching from acquisition of energy to production of energy is an investment with costs (e.g. leasing annual payment,...

A plethora of tools are used for investment decisions and performance measurement, including Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), Modified Internal Rate of Return (MIRR), Average Accounting Rate of Return (AARR). All these and other known metrics are...

In an interesting recent paper, DeAngelo and DeAngelo (2006) highlight that Miller and Modigliani's (1961) proof of dividend irrelevance is based on the assumption that the amount of dividends distributed to shareholders is equal or greater than the free cash flow generated by the fixed...

Residual income as commonly described in academic papers and in real-life applications may be formally described as a function of three variables: (i) the capital invested, (ii) the rate of return, (iii) the opportunity cost of capital. This paper shows that a different paradigm of residual...