Search results

Discounted cash flow (DCF), whether by capitalisation or by cash flow analysis, has many detractors because of a number of apparent problems such as the reinvestment assumption and the possibility of multiple rates of return. The capital recovery cum reinvestment aspects of Years' Purchase (YP) factors and DCF are discussed and it is demonstrated that Years' Purchase single rate principle is akin to Internal Rate of Return (IRR) and that Years' Purchase dual rate principle also has a DCF image known as the Modified Internal Rate of Return (MIRR). The difference between the YP models and the DCF models is to do with the level cash flows assumed in the former and the variability of the cash flows measured in the latter. MIRR was developed as an answer to the above problems and it is demonstrated in a case study in which the fallacy of the apparent problems is also demonstrated. MIRR has a place in the analysis of investment strategy, but IRR (equated yield) is shown to be satisfactory in the financial analysis and comparison of individual projects.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

The purpose of this paper is to offer a framework for computing optimal investment holding periods for real estate portfolios.

The analysis is set within a standard DCF modelling framework and it is shown that it is not adapted to offer sufficient insight into the mechanics leading to optimal holding periods. A richer framework is offered that enables the portfolios terminal value to behave according to a simple diffusion process.

The findings show that optimal holding periods for real estate investment portfolios exist within very precise conditions. The key parameters are the investor's weighted average cost of capital (WACC), the cash flow growth rate during the investment period, and the investment's net initial yield. The key finding is (loosely speaking) that, if the investor's cost of capital is outpaced by (the sum of) the portfolio's net initial yield and the cash flow growth rate, then an optimal holding period exists and can be precisely computed. Numerical examples are provided to illustrate these findings.

Standard financial theory does not specify a consistent methodology for choosing the optimal investment horizon in investment analysis and in particular in discounted cash flow (DCF) modelling. This problem may be particularly acute in real estate investment analysis and valuation, as investment horizons are often arbitrarily chosen. The paper proves that investment horizon may strongly influence net present value.

The paper looks at the influence of adding more projects on overall investment feasibility under conditions of uncertainty, and how far into the future the project cash flows should be relied upon, given that the project owner expects a reasonable level of feasibility attached to the investment.

The paper presents a formulation for the feasibility of the multi‐project case under uncertainty. A second order moment analysis method is adopted. Existing theory is extended to take into account the presence of multiple projects with a requirement imposed on feasibility by the project owner. In tandem with the theoretical development, example case study numerical results are presented.

With a conventional deterministic discounted cash flow analysis, the feasibility calculations change little in going from one to many projects. However with uncertainty attached, the feasibility calculations need to be reworked and become more complex, the issue of feasibility becomes less transparent on going from one to many projects, distinct feasibility transition points disappear, and feasibility is found to vary over the projects' time horizons.

The need for the analysis given in this paper resulted from an actual investment decision. The paper formulation provides interesting insight into feasibility calculations, and will be of use to practitioners engaged in front‐end project investment risk work.

The paper provides original commentary on the feasibility of multiple projects and the time‐variant nature of feasibility.

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.

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.

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.