Valuing long-term leases: The option to redevelop

Long-term leases on property are popular in many jurisdictions, both with private vendors and with local governments who want to retain future control over land use. A puzzling issue for vendors and purchasers has been how to value these leased properties relative to fee-simple properties. Simple present-value models suggest that there should be little difference between the price of fee-simple land and the price of long-term leases. Transaction prices in Canada on 80-year to 100-year residential leases, however, are 20 percent to 40 percent less than comparable fee-simple properties. We outline a financial model for valuing leased properties. The value of the option to upgrade or redevelop is considered. We show that the large part of the discount of leased properties from fee-simple properties can be explained by this option to redevelop.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/47799/1/11146_2004_Article_BF00173125.pd

Identification and characterisation of novel SNP markers in Atlantic cod: Evidence for directional selection

<p>Abstract</p> <p>Background</p> <p>The Atlantic cod (<it>Gadus morhua</it>) is a groundfish of great economic value in fisheries and an emerging species in aquaculture. Genetic markers are needed to identify wild stocks in order to ensure sustainable management, and for marker-assisted selection and pedigree determination in aquaculture. Here, we report on the development and evaluation of a large number of Single Nucleotide Polymorphism (SNP) markers from the alignment of Expressed Sequence Tag (EST) sequences in Atlantic cod. We also present basic population parameters of the SNPs in samples of North-East Arctic cod and Norwegian coastal cod obtained from three different localities, and test for SNPs that may have been targeted by natural selection.</p> <p>Results</p> <p>A total of 17,056 EST sequences were used to find 724 putative SNPs, from which 318 segregating SNPs were isolated. The SNPs were tested on Atlantic cod from four different sites, comprising both North-East Arctic cod (NEAC) and Norwegian coastal cod (NCC). The average heterozygosity of the SNPs was 0.25 and the average minor allele frequency was 0.18. <it>F</it>_{<it>ST </it>}values were highly variable, with the majority of SNPs displaying very little differentiation while others had <it>F</it>_{<it>ST </it>}values as high as 0.83. The <it>F</it>_{<it>ST </it>}values of 29 SNPs were found to be larger than expected under a strictly neutral model, suggesting that these loci are, or have been, influenced by natural selection. For the majority of these outlier SNPs, allele frequencies in a northern sample of NCC were intermediate between allele frequencies in a southern sample of NCC and a sample of NEAC, indicating a cline in allele frequencies similar to that found at the Pantophysin I locus.</p> <p>Conclusion</p> <p>The SNP markers presented here are powerful tools for future genetics work related to management and aquaculture. In particular, some SNPs exhibiting high levels of population divergence have potential to significantly enhance studies on the population structure of Atlantic cod.</p

Till cash management model

This thesis develops a model for the management of till cash (currency and coin) of a branch for a Vancouver area credit union. The model is developed in two parts. First, a model is estimated to forecast cash demand and then a cash order algorithm is developed. Two statistical models are developed to estimate cash demand. The first employs Box-Jenkins time series techniques. This model fails because the cash flow data are non-stationary, exhibiting both a growth trend and high autocorrelations at large lags. In the second model, a growth trend for real weekly cash flows is first estimated, incorporating an asymptotic capacity constraint. The real cash flow trend is converted to a nominal trend and used as the weight in a linear weighted least squares model for daily cash flows, in which the explanatory variables are dummy variables to indicate days of the week, months of the year, incidence of pay days, etc. The consistency of the resulting forecast model is also discussed. To develop a cash order algorithm, steady state models are first considered. These models are generally based on stationary cash demand, constant delivery lag times for orders and other assumptions that are inappropriate in this till cash management setting. To relax the steady state assumptions a general dynamic programming framework is developed for the cash management model that allows for either penalty costs for cash-outs (cash shortages) or a chance constraint involving the probability of a cash-out. Because of non-stationarity of the cash flows the dynamic program cannot be solved directly, but an approximate solution is obtained using a simulation technique. The resulting algorithm is tested on historical data and the results are discussed briefly.Business, Sauder School ofGraduat

Preferences, endowments and beliefs as revealed in market prices

This thesis examines conditions under which prices signal information about agents' preferences, endowments and/or probability information. In a multi-period economy, this information is important because it helps agents to make inferences about future prices. In a single period economy, this is important because, even if agents are only interested in other agents' probability information, it is important for them to be able to distinguish its effect on prices from the effects of preferences and endowments on prices. Several exchange economy models are constructed to see under what conditions a fully informing rational expectations equilibrium (FRE) exists in which the relevant information is revealed by prices. One class of models is in a two period state preference setting in which preferences exhibit linear risk tolerance (so that aggregate preferences exist). It is shown that a FRE exists that reveals aggregate preference parameters. In another two period state preference model with power utility (in which aggregate preferences do not exist), it is shown that prices generically can reveal local information about the distribution of agents' endowments. In another class of models, in both one period and two period settings with specific distributional assumptions , (normal and non-central gamma returns), conditions are found under which prices reveal information about probabilities, aggregate risk preferences and aggregate impatience. The thesis discusses the notion of a rational expectations equilibrium as a solution of a fixed point problem. It also discusses information in terms of a-algebras and partitions of state spaces.Business, Sauder School ofGraduat

Tax-Adjusted Discount Rates

This paper develops models for discount rates that are adjusted for the interest tax shields of an infra-marginal firm in a general tax equilibrium where there is cross-sectional variation in corporate tax rates. Under the assumption that the firm optimally maintains a predetermined debt ratio, a tax-adjusted riskless discount rate model is given for valuing certainty-equivalents and a tax-and-risk-adjusted discount rate model is given for valuing expected cash flows. For the latter case, the asset, equity, debt and tax-shield betas are derived and a weighted average cost of capital interpretation is given. The tax-adjusted CAPM/APT security market lines for expected returns in stock and bond markets both have the same slope but different intercepts. A formula is also provided for the present value of the interest tax shield when the firm optimally maintains a predetermined debt level. The analysis here also differs from the existing literature in the following respects: It allows for cross-sectional variation in corporate tax rates and personal tax rates. It shows that the market values of risky and riskless interest tax shields differ only to the extent that tax laws provide for nonlinear taxation of gains and losses. It also shows that interest tax shields should be discounted at a tax-adjusted discount rate that reflects the fact that they accrue to equity investors, rather than debt investors. Continuous-time simplifications of the formulas in this paper and the previous literature are also given.tax, personal tax rate, discount rate, cost of capital, capital budgeting

VALUING PUD RESERVES: A PRACTICAL APPLICATION OF REAL OPTION TECHNIQUES

Discounted Cash Flow (DCF) tools are fundamental to engineering and financial analysis in the oil industry, are well understood by managers, and generally provide accurate valuations of developed hydrocarbon reserves. Unfortunately, DCF techniques systematically undervalue proven undeveloped reserves (PUDs), may encourage premature development of certain reserves, and fail to identify important risk management opportunities. Real option valuation models overcome these shortcomings by providing a more complete picture of not only reserve values, but also of the drivers of that value. 2001 Morgan Stanley.

Some important issues involving real options: an overview

This paper provides an introduction to real options, as well as highlighting some important issues that are often neglected by real options analysts. While many books and surveys have been written on real options, there are some ubiquitous concepts that are not well-understood by many authors and practitioners. The objective of this paper is to redress this shortfall. The paper discusses organizational issues that impede adoption of real options strategies. It discusses modeling and analytic techniques for real options