Robust Net Present Value With Infinite Lifetime

In this study, Robust Net Present Value (RNPV) has been developed for evaluation of projects with infinite life. In this method, the changes of uncertain net incomes in a financial cash flow are postulated in a convex, continuous, and closed region. It has been indicated that RNPV, in the infinite life horizon, is calculable only when the net incomes are uncorrelated. Compared to traditional methods, this study considers the variance matrix of net incomes, takes uncertainty into account during the evaluation of investment projects with infinite life period. One important finding when using this method is that one does not need to calculate the covariance matrix in the evaluation of projects with infinite life. The only requirement is to estimate the value of maximum variance for the given financial cash flow. The proposed method is also easy to both calculate and understand in practice. MATLAB software is used for implementation. Lastly, the features of the developed method have been analyzed using some numerical examples for a project with infinite lifetime

POTENTIAL DIVIDENDS AND ACTUAL CASH FLOW. A REGIONAL LATIN AMERICAN ANALYSIS

We examine the value market assigns to components of the cash flow to equity including potential dividends. We study non financial publicly traded firms from five Latin American countries. The model includes four variables: market value of equity, dividends paid, change in equity investment and change in liquid assets (potential dividends) and are regressed with actual equity value as dependent variable. Tests applied give robust results. The main conclusions: Market assigns less than one dollar to a future dollar for any of the variables studied. Potential dividends destroy value. A dollar invested in liquid assets has a negative Net Present Value and it is not zero NPV investments. We confirm the agency costs of keeping undistributed cash flows.Cash flow to equity, potential dividends, equity value.

Out of Site out of Mind: Quantifying the Long-term Off-site economic Impacts of Land Degradation in Kenya

This study investigated the private and social returns to Sustainable Land Management (SLM) practices with an objective of finding practices that reduce the on-farm and off-farm negative effects of land degradation. The results show that SLM practices have robust profits for farmers raising dairy cows. Farmers without dairy cows realize profits that are sensitive to input and output prices. Adoption of SLM also provides global environmental services whose value is about 10% of the net present value. The results suggest the need to promote SLM practices with multiple uses and consider ways to compensate farmers who offer significant environmental services.Environmental Economics and Policy,

Relocatable modular capacities in risk aware strategic supply network planning under demand uncertainty

We propose a new model formulation for a three-echelon supply network design problem incorporating the concept of relocatable modular capacities. A robust supply network configuration must be determined based on uncertain demand. Furthermore, by incorporating the conditional value at risk (CVaR), the risk induced by uncertain demand is explicitly considered. The derived supply network configuration should maximize the weighted sum of the expected net present value and the CVaR. The resulting nonlinear model formulation is approximated by a piecewise linearization. Our numerical investigation shows that the derived supply network configuration is robust and stable in the presence of uncertain demand

Intertemporal State Budgeting

This study presents intertemporal budgeting as of 1999 for all 50 U.S.states. Intertemporal state budgeting compares the present value of a state's projected receipts with the present value of its projected expenditures (exclusive of interest payments)plus the current value of its net debt (liabilities minus assets). Our projections start with the 1999 U.S.Census Bureau's State Government Finances survey of receipts,expenditures,and debt.We group these highly detailed data into a framework that is consistent with the National Income and Product Account accounts. The 1999 Census data are the latest available.To project total receipts and expenditures for years beyond 1999,we first form average 1999 receipts and expenditures by age and sex using relative age-and sex-specific receipts and expenditure profiles.We estimate these profiles the Current Population Survey and the Consumer Expenditure Survey. Next we grow these averages using an assumed growth rate in labor productivity. Finally,year-and state-specific age-sex population estimates are multiplied by projected average receipts and expenditures by age and sex in that year to form that year's total projected state-specific receipts and expenditures.We form our year-age-sex-and state-specific population projections using the 2001 Social Security Administration 's projection of the total U.S. population by age and sex in conjunction with the 1995 Census projections on state-specific age-sex population shares. Our base-case results use a 3 percent real discount rate and assume a 1.5 percent real productivity growth rate.They show a great range of state intertemporal imbalances. When measured as a share of (scaled by) the present value of projected expenditures, imbalances range from positive 48 percent in Alaska to negative 19 percent in Vermont. These and other findings proved to be very robust to changes in productivity and discount rates as well as changes in demographic assumptions. State official liabilities are not good proxies for their intertemporal imbalances.Indeed, the correlation between scaled state intertemporal imbalances and gross state debt scaled by state income is essentially zero.The corresponding correlation based on net state debt is negative. Given this, it's not surprising that we find very little correspondence between the ranking of the states based on their intertemporal budget imbalances and the credit ratings published by either Moody's or Standard and Poor's. Our user-friendly program for calculating intertemporal state budget imbalances (the difference between a)the present value of

Sounds of Silence: a sampling-based bi-criteria harmony search metaheuristic for the resource constrained project scheduling problem with uncertain activity durations and cash flows

In this paper, a new sampling-based bi-criteria hybrid harmony search metaheuristic for the resource-constrained project-scheduling problem (RCPSP) with uncertain activity durations (UAD) and uncertain cash flows (UCF) is proposed, with the total project duration () and the net present value () as objectives. The problem-specific Sounds of Silence (SoS) metaheuristic is an appropriate hybridization of the robust SoS with uncertain activity durations, and the crisp SoS developed for several a primary-secondary (PS) and bi-criteria (BC) project scheduling problems. In order to illustrate the efficiency and stability of the proposed problem-specific SoS, we present detailed computational results for a larger and challenging project instance. Results reveal the fact that the modified and extended SoS is fast, efficient and robust algorithm, which is able to cope successfully with the project-scheduling problems when we replace the traditional crisp parameters with uncertain-but-bounded parameters.

Climate change and the value of fishing in the Arctic

Several studies indicate impacts on fish from climate change in the Arctic, but there is no study calculating the effect on the value of fishing. The value of fishing is determined not only by climate change, but also by other variables including prosperity and population density. The present study estimates the impact of these factors on the recreational value of fishing by using meta-regression analysis of studies estimating willingness-to-pay for fishing in the Arctic. The study includes 22 studies with a total of 107 observations, and the results indicate robust results with a positive relation between estimated value and temperature and prosperity, but a negative with precipitation. Using the results from the regression, simulations showed that increases by the same percent in temperature and precipitation give a minor net decrease in the fishing value, but an increase in the temperature with 1 ̊C can raise the average fishing value by approximately 15 percent

The Effects of Tax Rules on Nonresidential Fixed Investment: Some Preliminary Evidence from the 1980s

The evidence presented in this study confirms that tax-induced changes in the profitability of investment have had a powerful effect on the share of GNP devoted to nonresidential fixed investment. More specifically, we have reestimated two models of aggregate investment initially presented in Feldstein, "Inflation, Tax Rules and Investment: Some Econometric Evidence,"(Econometrica, 1982). The present study extends the previous analysis byusing revised national income accounts, by improving the estimation of the effective tax rate and the profitability of new investments, and by extending the sample to include the years 1978 through 1984. Despite these changes, the new statistical estimates are remarkably close to the previous results. The statistical estimates are also very robust with respect to sample period, estimation method, and the presence of other variables.The first model relates the investment-GNP ratio to the real net-of-tax rate of return received by the providers of debt and equity capital to the nonfinancial corporate sector and to the rate of capacity utilization. Our estimates imply that each percentage point increase in the real net return raises the investment-GNP ratio by 0.4 percentage points. A one percent age point increase in the net return is equivalent to a ten percentage point reduction in the overall effective tax rate. Since the net nonresidential fixed investment averaged 3 percent of GNP during the past three decades, a ten percentage point tax reduction induces a 13 percent rise in the investment-GNP ratio.Our second model relates the investment-GNP ratio to the difference between the maximum potential net return that firms can support by investing in a "standard investment project" and the net cost of debt and equity capital. The statistical estimates imply that each percentage point change in this measure of the rate of return over cost raises the investment-GNP ratio by 0.3 percentage points or 10 percent of its three-decade average.The estimates imply that the 1985 tax bill passed by the House of Representatives would reduce the investment-GNP ratio by between 10 percentand 15 percent of its average value, depending on the model used to make the calculation. Such reductions would represent between one-half and three-fourths of the rise in the investment-GNP ratio since the 1981 investment incentives were adopted.

Production Scheduling and Waste Disposal Planning for Oil Sands Mining Using Goal Programming

In oil sands mining, timely provisions of ore and tailings containment with less environmental footprints are the main drivers of profitability and sustainability. The recent Alberta Energy Resources Conservation Board Directive 074 requires oil sands waste disposal planning to be an integral part of mine planning. This requires the development of a well integrated strategy of directional mining and tailings dyke construction for in-pit and ex-pit tailings storage management. The objectives of this paper are to: 1) determine the order and time of extraction of ore, dyke material and waste that maximizes the net present value; 2) determine the destination of dyke material that minimizes construction cost; and 3) minimize deviations from the production goals of the mining operation. We have developed, implemented, and verified a theoretical optimization framework based on mixed integer linear goal programming (MILGP) to address these objectives. This study presents an integration of mixed integer linear programming and goal programming in solving large scale mine planning optimization problems using clustering and pushback techniques. Application of the MILGP model was presented with an oil sands mining case. The MILGP model generated a smooth and uniform mining schedule that generates value and provides a robust framework for effective waste disposal planning. The results show that mining progresses with an ore to waste ratio of 1:1.5 throughout the mine life, generating an overall net present value of $14,237M. This approach improves the sustainable development of oil sands through better waste management

Towards the design of resilient waste-to-energy systems using Bayesian networks

The concept of resilience has emerged from various domains to address how systems, people and organizations can handle uncertainty. This paper presents a method to improve the resilience of an engineering system by maximizing the system economic lifecycle value, as measured by Net Present Value, under uncertainty. The method is applied to a Waste-to-Energy system based in Singapore and the impact of combining robust and flexible design strategies to improve resilience are discussed. Robust strategies involve optimizing the initial capacity of the system while Bayesian Networks are implemented to choose the flexible expansion strategy that should be deployed given the current observations of demand uncertainties. The Bayesian Network shows promise and should be considered further where decisions are more complex. Resilience is further assessed by varying the volatility of the stochastic demand in the simulation. Increasing volatility generally made the system perform worse since not all demand could be converted to revenue due to capacity constraints. Flexibility shows increased value compared to a fixed design. However, when the system is allowed to upgrade too often, the costs of implementation negates the revenue increase. The better design is to have a high initial capacity, such that there is less restriction on the demand with two or three expansions.</jats:p