In a recent paper, Jennergren analyzes four loan subsidy valuation methods suggested in authoritative text books. He shows that the first three can be derived from a unique formula whose value depends on the nonsubsidized loan amount that is assumed to be replaced by the subsidized loan. When...

Richard Miller's reply (2008) to my comment (2008) on his claim (2007) that the standard WACC formula fails to correctly remunerate shareholders and bondholders raises crucial questions on the nature of the project's debt that he considers in his calculations. To clarify this point, I here...

In this journal, Miller (2008) argues that the standard WACC formula fails to correctly remunerate shareholders and bondholders. This is proved by considering a project yielding a zero net present value. In this comment, we prove that this apparent failure of the standard WACC approach simply...

We suggest a new approach to calculating a project's net present value, termed the "displaced equity method". Based on a straightforward formula, it analyzes a project partially financed with debt from the perspective that every year the amount of outstanding debt displaces an equivalent amount...

A multinational firm operating under various tax regimes can minimize the total after-tax cost of its debt by allocating it optimally between its projects. To value a marginal project in this context, we build a multi-period model for the selection of projects, assuming that the firm maintains a...

Repeated oil price spikes have generated a great deal of controversy about the role played by speculation in derivatives markets. A number of analysts have suggested that the speculative positions of financial investors played a major part in the 2008 oil-price hike. In contrast, some economists...

In standard microeconomic theory, short-run and long-run marginal costs are equal for production equipment with adjusted capacity. When the production of joint products from interdependent equipment is modeled with a linear program, this equality is no longer verified. The short-run marginal...

Saudi Arabia aims to reduce the growth of its energy demand. This paper shows how to substantially reduce the current fuel consumption and economic inefficiencies in the Saudi energy system, without altering consumer prices. We use the newly-developed KAPSARC Energy Model, a multi-sector...

Using a multi-sector equilibrium model of the Saudi energy system that handles administered prices in a mixed-complementarity formulation, we present results from a set of policy scenarios where end consumer prices are not altered. Some of these scenarios are the solutions to Mathematical...