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The purpose of this paper is to export the idea of “Core Competency Based Valuation”. Wireless network operations services companies have exploded in importance and face unprecedented challenges in valuing them. This article considers how one firm's managers are enhancing their value through better performance and decision making to input long‐term value, along with the industry growth and highly favorable customer response to their quality products and services.

This fairly extensive, yet focused paper, was based on accepted financial valuation procedures, due diligence from visit with managers and relevant market data. This paper also reflects other critical valuation quantitative information concerning their considerable business activity and excellent future prospects in the “sales deals pipeline” such as Nokia, a key customer development, that should be reflected in any detailed report regarding valuation.

Effective management requires that the emphasis return to fundamentals, even if it makes analysts unhappy in the short‐term. For managers, DCF tools will continue to be important. However, history also shows that on occasion market valuations can and do deviate. They can benefit that way only if they understand the real underlying values. Managers need to keep their focus on discounted cash flow and all those factors in the company and marketplace that reflect the firm's capabilities and opportunities.

What makes wireless firms, and especially new wireless firms, different? First, they usually have not been in existence for more than a year or two, leading to a very limited history. Second, their current financial statements reveal very little about the component of their assets – expected growth – that contributes the most to their value. Third, these firms often represent the first of their kind of business. In many cases, there are no competitors or a peer group against which they can be measured.

The purpose of this paper is to determine the required return of intangible assets for eight different business sectors by means of an empirical study of companies from the US Standard & Poor's 500 index. The resulting required return is subsequently compared with proxies for the required return on intangible assets used in practice, such as the weighted average cost of capital (WACC).

To determine the discount rate of the intangible assets the paper applies the weighted average return on assets method (weighted average return on assets (WARA) method). The paper finds the return on intangible assets (R_IA) by setting the WARA equal to the WACC and solves the equation for R_IA.

For all the identified sectors, the R_IA is higher than the WACC. It is also shown that this return is higher than the levered or unlevered cost of equity of the company as a whole. In six of the eight sectors, the levered cost of equity appears to be the best proxy for the required return on intangible assets.

The paper shows how the required return on intangible assets can be estimated. The required return is needed for discounted cash flow valuations of intangible assets.

This paper adjusts the WARA method applied by Smith and Parr. In contrast to Smith and Parr, the tax shield is included as a separate asset in the model. Consequently, the WACC before tax is used instead of the WACC after tax.

Strategy is ultimately aimed at creating shareholder value. We examine the relationship among intrinsic (DCF) value, market value, and the value of growth options using a “perfect foresight” model. Our findings suggest that Kester's (1984) initial assessment of growth option values may not hold under alternative valuation models. We highlight important issues in the valuation of growth options related to market expectations, modeling assumptions and estimation methods. The findings suggest that the firm's growth option value depends on three factors, each of which impacts investor expectations: (1) the macroeconomic environment; (2) the industry in which the firm participates; and (3) firm specific factors.

The “time value of money principle,” a building block of finance theory and practice, states that money today is worth more than money in the future. In this chapter, we argue that this principle is not consistent with intergenerational equity or sustainability.

We demonstrate that standard capital budgeting negatively affects sustainability by presenting two numerical examples and by discussing the role of financial markets in the time value of money and the discount rate. We then discuss Silvio Gesell’s (1862–1930) concept of Freigeld as a possible alternative framework for a “socially optimal” discount rate.

We show that the time value of money principle, as employed in standard capital budgeting techniques, tends to reject sustainable projects (that only break even in the long run) and accept unsustainable projects (that break even in the short term but entail significant long-term negative externalities). We find that fiat currencies offer interesting perspectives in the context of sustainability.

We show that money, interest rates and investment valuation techniques are not merely technical tools, but have important institutional, social, and political attributes. Taken together with current global demands for sustainability, this observation could justify a new research agenda seeking to redefine current capital budgeting techniques.

We stress that the “time value of money principle” should not be viewed as a technical tool, but rather, as a social and political construct. We argue that the principle needs to be reconsidered given the current global sustainability crisis.

The economics literature considers that externalities indicate a market failure, to which policy makers should respond by introducing optimal tax incentives and regulation. At the same time, the management studies literature has proposed a set of initiatives to align corporate governance with sustainability principles. This chapter examines an issue that concerns both these literatures, that is, the relationship between sustainability and the time value of money.

With timeliness and measurement of asset impairments as well as management opportunistic behaviour being topical, since the issuance of Australian Accounting Standards Board (AASB) 136, this study aims to examine whether assumptions about growth and discount rates made about asset recoverable amounts determine asset impairments.

This study uses a sample of 450 firm-year observations representing 133 Australian listed firms from 2015 to 2018. An estimation model is used where asset impairments is the dependent variable, growth and discount rates are the variables of interest and several impairment indicators are included as controls.

The results show that the decrease in growth rate but not the increase in discount rate affects the recognition of large asset impairments, where firms decrease the growth rate in the year of recognition. A change in discount rate affects asset impairments only when it is higher than the industry average. Hence, the growth rate is the management’s tool of choice in the recognition of asset impairments.

This study provides additional insight into how AASB 136 is used in practice. This includes investigating the tools used by firms in the calculation of asset recoverable amount and whether firms provide important information, as a part of disclosure. The results are of interest to investors and policymakers because they highlight the need for more restrictions around growth rate assumptions and less variation in disclosure.

Employs discounted cash flow analysis as a valid method for valuing future cash flows from property investments. The method has regard to the market participants’ investment behaviour and thus is able to encapsulate the economics of the investment decisions made; particularly by institutional investors. Observes, however, that there has always been serious concern about discounting property investment returns using discount rates that predicate long‐term bond yields. Reports on a comparative study between Australian ten‐year bond and the prime Sydney and Melbourne office yields which has been carried out to find out if there is a correlation. The relationship between the two yields for period March 1980‐March 1995 shows an inverse relationship, i.e. a negative correlation between the two yields. The result is consistent for both studies. The actual f‐value of 89 for Sydney office yields versus bond yields and 110 for Melbourne office yields versus bond yields, respectively, when compared with the table f‐value of 7.08 for the data set, indicate that the negative relationship is significant. Argues, in addition, that the achieved R² of 60 and 65, respectively, indicates that the explanatory power of the model is acceptable. So a discount rate based on bond yields, in the rising bond market, will indicate a higher future return from the property investment. Concludes that the result is totally flawed, given the inverse relationship between bond and property yields, because the actual future return will be lower; and that, as a result, in the rising bond market the prospective property investors who ought to achieve higher future return will actually end up achieving a lower return. A converse flawed result will be achieved in the falling bond market. In this market the vendors using this method to calculate the exit value of their investments are actually accepting an incorrect lower price.

This paper reports on how a group of secondary school teachers collaborated in a school‐based professional development called Learning Study to improve accounting students' performance on the drawing up of cash budgets.

In drawing up cash budgets – the object of learning – a power point presentation incorporating systematic variation was designed to reduce the overwhelming mass of (often irrelevant) data normally presented to students in textbooks and examiners' reports as part of the solutions to cash budget problems. In total, three lessons were designed focusing on how the object of learning could be handled. In each lesson the critical aspects corresponding to the object of learning were identified and a systematic pattern of variation was applied.

It was found that student learning improved progressively over the three lessons.

There is evidence to suggest that this Learning Study has made an impact, not only on student learning but also on teacher learning, and has contributed in some way to creating a learning culture in this school.

The aim of this paper is to use rent and price dynamics in the future cash flows in order to improve real estate portfolio valuation.

Monte Carlo simulation methods are employed for the measurement of complex cash generating assets such as real estate assets return distribution. Important simulation inputs, such as the physical real estate price volatility estimator, are provided by results on real estate indices for Paris, derived in an article by Baroni et al..

Based on a residential real estate portfolio example, simulated cash flows: provide more robust valuations than traditional DCF valuations; permit the user to estimate the portfolio's price distribution for any time horizon; and permit easy values‐at‐risk (VaR) computations.

The terminal value estimation is a core issue in real estate valuation. To estimate it, the proposed method is not based on an anticipated growth rate of cash flows but on the estimation of the trend and the volatility of real estate prices.

The purpose of this paper is to provide additional empirical evidence about capital budgeting practices in an emerging economy.

The study utilizes a questionnaire and interview to collect data from respondents.

The results show that the JIC give almost equal importance to the discounted and undiscounted cash flow methods in evaluating capital investment projects. It appeared also that the most frequent used technique is the profitability index followed by the payback period.

Based on these results, the researchers recommend putting a great attention to apply the concepts and techniques of capital budgeting in an appropriate manner. The corporations should also consider importance of information technology and its applications in capital budgeting.

This is the first study applied on the capital budgeting practices and its related issues in the JIC.