Discounting Damage Awards Using the Zero Coupon Treasury Curve: Satisfying Legal and Economic Theory While Matching Future Cash Flow Projections

2010 ◽  
Vol 21 (2) ◽  
pp. 173-194 ◽  
Author(s):  
Joseph Irving Rosenberg
Keyword(s):  
Economic Theory ◽  
Discount Rate ◽  
Cash Flows ◽  
Legal Requirements ◽  
Damage Awards ◽  
Lump Sum ◽  
Alternative Approach ◽  
Treasury Bond ◽  
The Subject ◽  
Consistent Treatment

Abstract How to calculate damage awards has long been the subject of academic dispute. Much focus has been on what is the appropriate discount rate to convert future lost earnings into a lump sum amount. Conflicting or ambiguous legal guidance by the courts has lead to wide disparities in discount rate methodology. This paper presents a fresh, alternative approach to valuing lost earnings in damage awards using current market data from the zero coupon Treasury bond curve. Unlike many other approaches this approach satisfies legal requirements while offering several theoretical and practical benefits: (a) default free discounting; (b) market-based prices and yields; (c) a fully objective way to recompute awards if market conditions change materially in the course of litigation; (d) satisfaction of the “parity in risk” principal which requires consistent treatment of uncertainty in cash flows and discount rate, which is violated by using an arbitrary average of three-month T-bill rates if inflation is embedded in lost earnings; and (e) a theoretically investible stream of cash flows that can be maturity matched against projected lost earnings.

The Idea of a Meaningful Synthesis of Marxist and Non-Marxist Systems of Political Economy as a Mirror of Intellectual Turmoil (About V.T. Ryazanov’s Book «Modern Political Economy: Prospects of Neo-Marxist Synthesis»)

2019 ◽  
pp. 74-98
Author(s):  
A.B. Lyubinin
Keyword(s):  
Economic Theory ◽  
Political Economy ◽  
Economic Status ◽  
Economic Science ◽  
Objective Reality ◽  
Commodity Production ◽  
Subjective Assessments ◽  
The Subject ◽  
The Difference ◽  
Political Economic

Review of the monograph indicated in the subtitle V.T. Ryazanov. The reviewer is critical of the position of the author of the book, believing that it is possible and even necessary (to increase the effectiveness of General economic theory and bring it closer to practice) substantial (and not just formal-conventional) synthesis of the Marxist system of political economy with its non-Marxist systems. The article emphasizes the difference between the subject and the method of the classical, including Marxist, school of political economy with its characteristic objective perception of the subject from the neoclassical school with its reduction of objective reality to subjective assessments; this excludes their meaningful synthesis as part of a single «modern political economy». V.T. Ryazanov’s interpretation of commodity production in the economic system of «Capital» of K. Marx as a purely mental abstraction, in fact — a fiction, myth is also counter-argued. On the issue of identification of the discipline «national economy», the reviewer, unlike the author of the book, takes the position that it is a concrete economic science that does not have a political economic status.

An Analysis of the Sources of Value Loss Following Financial Restatements

2021 ◽  
pp. 0148558X2198991
Author(s):  
Philip K. Hong ◽  
Jaywon Lee ◽  
Sang-Hyun Park ◽  
Sukesh Patro
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Discount Rate ◽  
Stock Price ◽  
Cash Flows ◽  
Financial Fraud ◽  
Earnings Persistence ◽  
Flow Component ◽  
Financial Restatements ◽  
Value Loss

We decompose the total value loss around firms’ announcements of financial restatements into components arising from investors’ revisions in cash flows and discount rates. First, relative to population benchmarks, restatements represent circumstances in which the cash flow component becomes more important in explaining valuations. While we find significant contributions from both sources, with the cash flow component explaining more than 33% of the variation in stock returns surrounding restatement announcements, this component explains only 13% to 22% in comparable non-restating firms. When restatements are caused by underlying financial fraud, the discount rate impact becomes more important, explaining about 88% of return variation. On the contrary, the cash flow impact is relatively larger for firms with higher earnings persistence or restatements associated with errors. Our decomposition of the value loss helps explain returns in the post-announcement period. Firms with a higher relative discount rate impact experience a significant downward stock price drift after the initial announcement-related price decline. For firms with a higher relative cash flow impact, the evidence suggests the initial impact of the restatement announcement is more complete with no subsequent drift pattern. Our findings close gaps in the evidence on financial restatements and extend the literature on the drivers of stock price movements.

scholarly journals AN ALTERNATIVE APPROACH TO IDENTIFY KEY INDUSTRIES: ISSUES TO SELECTION CRITERIA

2014 ◽  
Vol 15 (3) ◽  
pp. 577-598
Author(s):  
Abul Quasem Al-Amin ◽  
Abdul Hamid Jaafar
Keyword(s):  
Selection Criteria ◽  
Public Investment ◽  
Correct Identification ◽  
The Public ◽  
Study Approach ◽  
Sectoral Planning ◽  
Alternative Approach ◽  
The Subject ◽  
Key Industries ◽  
High Degree

Within a process of modeling exercise, this study aimed to understand appropriate selection criteria to identify key industries. There are many key sector identification linkage measures in the subject matter and sensitivity issue among them can be tricky because many of these measures differ only slightly but can result in outcomes that are quite dissimilar. With this background, we proposed an alternate approach that helps to resolve this issue. The proposed approach utilizes in this study by five sub-methods and high degree of the frequency of their occurrences in sub-methods to determine the key sectors. The study approach is applied to Malaysia as the public sector investment remains a large share in the national economy, like other developing countries, and the correct identification is still a challenge for sectoral planning. The experiences from this study can be used to guide appropriate public investment in Malaysia and elsewhere with similar economic forms.

A Dynamic Analysis of Child Labor with a Variable Rate of Discount: Some Policy Implications

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Satya P Das ◽  
Rajat Deb
Keyword(s):  
Discount Rate ◽  
Child Labor ◽  
Time Preference ◽  
Infinite Horizon ◽  
Policy Implications ◽  
Poverty Trap ◽  
Variable Rate ◽  
Lump Sum ◽  
Long Run ◽  
Short Run

AbstractThis paper analyzes the problem of child labor in an infinite-horizon dynamic model with a variable rate of time preference and credit constraints. The variability in the rate of time preference leads to the possibility of multiple steady states and a poverty trap. The paper considers the long-run and short-run effects of an array of policies like enrollment subsidy, improvement in primary education infrastructure, lump-sum subsidy, and variations in loan market parameters. We distinguish between policies that reduce child labor in the long run only in the presence of a variable discount rate and other policies which work whether or not the discount rate is variable. Credit-related policies belong to the former group. Policies that reduce child labor and increase family consumption in the long run may have an adverse effect of lowering consumption in the short run.

scholarly journals Policy Assessment Investment Appeal of Innovation Projects Enterprises

2019 ◽  
Vol 9 (2) ◽  
pp. 5111-5122
Keyword(s):  
Regression Analysis ◽  
Practical Experience ◽  
Cash Flows ◽  
Financial Indicators ◽  
Correlation And Regression Analysis ◽  
Proposed Model ◽  
Modern Economic ◽  
The Subject ◽  
The Relationship ◽  
Future Cash Flows

The aim of the article is to summarize theoretical principles and practical experience regarding the relationship between the investment attractiveness of innovative projects and economic growth. The methods of correlation and regression analysis, extrapolation and modeling are used. The subject of the study was the features and patterns of the formation, use and regulation of the policy for assessing the investment attractiveness of company’s innovative projects in modern economic conditions. In the course of the study, an algorithm was developed to assess the size and level of investment attractiveness of the algorithm is based on the allocation of components of the enterprise’s potential. It is indicated that models for evaluating efficiency and cost should take into account not only future cash flows, but also non-financial indicators. Are proposed the construction of a multivariate model based on regression analysis. The essence of this model is to combine the traditional method of correlation analysis with least squares. This approach has the main advantage - relatively high accuracy and low costs in the construction and forecasting. The proposed model of a system for ensuring the investment attractiveness of innovative projects of companies consists of two main subsystems - information-analytical and implementation-control. These blocks provide results that allow you to increase investment attractiveness, as well as timely determine the external and internal risks of the enterpriseThe aim of the article is to summarize theoretical principles and practical experience regarding the relationship between the investment attractiveness of innovative projects and economic growth. The methods of correlation and regression analysis, extrapolation and modeling are used. The subject of the study was the features and patterns of the formation, use and regulation of the policy for assessing the investment attractiveness of company’s innovative projects in modern economic conditions. In the course of the study, an algorithm was developed to assess the size and level of investment attractiveness of the algorithm is based on the allocation of components of the enterprise’s potential. It is indicated that models for evaluating efficiency and cost should take into account not only future cash flows, but also non-financial indicators. Are proposed the construction of a multivariate model based on regression analysis. The essence of this model is to combine the traditional method of correlation analysis with least squares. This approach has the main advantage - relatively high accuracy and low costs in the construction and forecasting. The proposed model of a system for ensuring the investment attractiveness of innovative projects of companies consists of two main subsystems - information-analytical and implementation-control. These blocks provide results that allow you to increase investment attractiveness, as well as timely determine the external and internal risks of the enterprise

scholarly journals Assessing the non-financial investment profitability with variable discount rate

2015 ◽  
Vol 6 (4) ◽  
pp. 123
Author(s):  
Katarzyna Gwóźdź
Keyword(s):  
Discount Rate ◽  
Risk Premium ◽  
Financial Investment ◽  
The Subject

In the work, the subject of the discount rate assessment is presented. The discount rate is usually considered as constant in the whole investment period, which seems to be the main problem. The constant discount rate does not take into account the actual money loses value in time. Moreover, the discount rate elements can change in time, and it should be remembered that many factors, which could also change, influence the value of those elements. The research confirms that the assumption of using the constant discount rate is erroneous. In the work one can find i.a. the methods of own capital assessment or the proposal of different techniques of risk premium valuation.

scholarly journals KONSEPSI KEAGAMAAN DAN KEPEMIMPINAN SUNNI VS SYIAH

2020 ◽  
Vol 1 (1) ◽  
pp. 17-32
Keyword(s):  
Arab Spring ◽  
The Political ◽  
Literature Study ◽  
Legal Requirements ◽  
The Subject ◽  
The Arab Spring

This article is a literature study that aims to trace the literature to be able to understand the concepts of religion and leadership of Sunni vs. Shiite which has often been the subject of discussion among world academics. The problems that arise among Sunnis and Shiites are not only present on the political side, but also on the concepts of religion and leadership which also become polemic. Like the Arab Spring incident which resulted in the collapse of the power of Muammar Qadafy in Libya and Ben Ali in Tunisia, Sunni and Shia relations were also colored by differences. The conclusion of this article then shows that both Sunni and Shi'a agree that the existence of a Khilafah / Imamat government is an obligation in the lives of Muslims. Regarding the form of khilafah or government, Sunni scholars tend to be represented by Imam al-Mawardi, al-Ghazali and Ibn Kholdun tend to be accommodating towards the models of government that are carried out in the principles of deliberation both kingdom and democracy. In the Shi'ite leadership doctrine, leadership is absolute and the legal requirements of one's faith and leadership is limited to imams who are descendants of Imam Ali ibn Abi Talib, but while waiting for the presence of the "supernatural" imams, the enforcement of Islamic government is absolutely carried out by the Mullahs.

scholarly journals Merchant cash advances: investigating the taxation consequences in South Africa

2015 ◽  
Vol 8 (2) ◽  
pp. 415-431
Author(s):  
Eduard Kilian ◽  
Rudie Nel
Keyword(s):  
South Africa ◽  
Service Provider ◽  
Income Tax ◽  
Cash Flows ◽  
Financial Service ◽  
Debit Card ◽  
Lump Sum ◽  
Gross Income

The merchant cash advance is an emerging lending product designed to address the need to maintain cash flows and is essentially the business equivalent of a “payday” loan. A lump-sum advance is made by the merchant cash advance service provider to a business (the merchant) in exchange for an agreed upon percentage of future credit and/or debit card receivables. This article investigates the taxation consequences of merchant cash advance transactions in South Africa, in an attempt to provide guidance which is currently lacking. Although it is posited that a merchant cash advance is a form of debt factoring, the income tax treatment of the initial advance and the resulting discount reflect that of a loan. Through the investigation it was determined that merchants will be able to deduct the discount and processing fees from income. The merchant cash advance service provider will include such discount and processing fee in ‘gross income’. The initial advance and any resulting discount are held to be a ‘financial service’ and therefore an exempt supply for VAT purposes, with the processing fee constituting a taxable supply.

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