Optimal Capital Structure in Real Estate Investment: A Real Options Approach

This article employs a real options approach to investigate the determinants of an optimal capital structure in real estate investment. An investor has the option to delay the purchase of an income-producing property because the investor incurs sunk transaction costs and receives stochastic rental income. At the date of purchase, the investor also chooses a loan-to-value ratio, which balances the tax shield benefit against the cost of debt financing resulting from a higher borrowing rate and a lower rental income. An increase in the sunk cost or the risk of investment will not affect the financing decision, but will delay investment. An increase in the income tax rate or a decrease in the depreciation allowance will encourage borrowing and delay investment, while an increase in the penalty from borrowing, a decrease in the investor's required rate of return, or worse real estate performance through borrowing, will discourage borrowing and delay investment.Optimal Capital Structure; Real Estate Investment; Real Options; Transaction Costs

Environment, irreversibility and optimal effluent standards

The present article investigates the use of performance standards to correct environmental externalities. Each firm in an industry emits waste in the production process, and, in turn, the average waste emissions of the industry adversely affect the firm's productivity. The firm, which incurs sunk costs when employing capital to abate waste emissions, is uncertain about the efficiency of capital. The firm will underestimate environmental externalities and will therefore pollute more than is socially efficient. To correct this tendency, the regulator can set a limit on either emissions or the emission‐output ratio at the socially efficient level. The firm will invest more, produce more, and pollute less when the regulator implements the former than when the regulator implements the latter.Environmental Economics and Policy,

Measuring Nonequilibrium Temperature of Forced Oscillators

The meaning of temperature in nonequilibrium thermodynamics is considered by using a forced harmonic oscillator in a heat bath, where we have two effective temperatures for the position and the momentum, respectively. We invent a concrete model of a thermometer to testify the validity of these different temperatures from the operational point of view. It is found that the measured temperature depends on a specific form of interaction between the system and a thermometer, which means the zeroth law of thermodynamics cannot be immediately extended to nonequilibrium cases.Comment: 8 page

Calculations of transonic potential flow over cascades

Transonic flow through a cascade was studied by using the full potential equation and the finite volume method of Jameson and Caughey. The C-type computational grid is generated by an electrostatic analogy and simple shearing transformation. The solution algorithm includes an option of using either an artificial density or an artificial viscosity formulation of the dissipative term. Using the developed code, flows through a cascade of NACA 0012 airfoils and flows through a cascade of shockless blades were computed. It is found that the designed flow through the shockless blade is accurately predicted, the artificial density formulation shows more tolerance to the mesh irregularity, and the C-type mesh does not extend very far upstream for a small pitch-cord ratio

Transition to ballistic regime for heat transport in helium II

The size-dependent and flux-dependent effective thermal conductivity of narrow capillaries filled with superfluid helium is analyzed from a thermodynamic continuum perspective. The classical Landau evaluation of the effective thermal conductivity of quiescent superfluid, or the Gorter-Mellinck regime of turbulent superfluids, are extended to describe the transition to ballistic regime in narrow channels wherein the radius $R$ is comparable to (or smaller than) the phonon mean-free path $\ell$ in superfluid helium. To do so we start from an extended equation for the heat flux incorporating non-local terms, and take into consideration a heat slip flow along the walls of the tube. This leads from an effective thermal conductivity proportional to $R^2$ (Landau regime) to another one proportional to $R\ell$ (ballistic regime). We consider two kinds of flows: along cylindrical pipes and along two infinite parallel plates.Comment: 16 page

The Impacts of Fees and Taxes on Choices of Development Timing and Capital Intensity

This article compares the effects of various fiscal policies on choices of development timing and capital intensity when rents on housing follow geometric Brownian motion with those when rents follow arithmetic Brownian motion. These policy instruments include fees on capital, housing, and land, and taxes on urban income, and properties both before and after development. Regardless of the motion of rents, when one choice is fixed, the effects of these policy instruments on the other choice are qualitatively the same. When the two choices are determined endogenously, although these policy instruments exhibit the same qualitative effect on the choice of development timing, they may exhibit different effects on the choice of capital intensity if rents on housing follow different types of motions.Capital intensity, Development Timing, Fees, Taxation, Real Options, International Development, G13, H21, H23, R52,

Singularity embedding method in potential flow calculations

The so-called H-type mesh is used in a finite-element (or finite-volume) calculation of the potential flow past an airfoil. Due to coordinate singularity at the leading edge, a special singular trial function is used for the elements neighboring the leading edge. The results using the special singular elements are compared to those using the regular elements. It is found that the unreasonable pressure distribution obtained by the latter is removed by the embedding of the singular element. Suggestions to extend the present method to transonic cases are given