Reconciling value estimates from the discounted cash flow model and the residual income model

This paper examines why practitioners and researchers get different estimates of equity value when they use a discounted cash flow (CF) model versus a residual income (RI) model. Both models are derived from the same underlying assumption -- that price is the present value of expected future net dividends discounted at the cost of equity capital -- but in practice and in research they frequently yield different estimates. We argue that the research literature devoted to comparing the accuracy of these two models is misguided; properly implemented, both models yield identical valuations for all firms in all years. We identify how prior research has applied inconsistent assumptions to the two models and show how these seemingly small errors cause surprisingly large differences in the value estimates. [ABSTRACT FROM AUTHOR]

Forecasting stock returns using model-selection criteria

This paper examines the economic significance of return predictability in Australian equities. In light of considerable model uncertainty, formal model-selection criteria are used to choose a specification for the predictive model. A portfolio-switching strategy is implemented according to model predictions. Relative to a buy-and-hold market investment, the returns to the portfolio-switching strategy are impressive under several model-selection criteria, even after accounting for transaction costs. However, as these findings are not robust across other model-selection criteria examined, it is difficult to conclude that the degree of return predictability is economically significant.

Application of a coupled ground-surface water flow model to simulate periodic groundwater flow influenced by a sloping boundary, capillarity and vertical flows

Theoretical developments as well as field and laboratory data have shown the influence of the capillary fringe on water table fluctuations to increase with the fluctuation frequency. The numerical solution of a full, partially saturated flow equation can be computationally expensive. In this paper, the influence of the capillary fringe on water table fluctuations is simplified through its parameterisation into the storage coefficient of a fully-saturated groundwater flow model using the complex effective porosity concept [Nielsen, P., Perrochet, P., 2000. Water table dynamics under capillary fringes: experiments and modelling. Advances in Water Resources 23 (1), 503-515; Nielsen, P., Perrochet, P., 2000. ERRATA: water table dynamics under capillary fringes: experiments and modelling (Advances in Water Resources 23 (2000) 503-515). Advances in Water Resources 23, 907-908]. The model is applied to sand flume observations of periodic water table fluctuations induced by simple harmonic forcing across a sloping boundary, analogous to many beach groundwater systems. While not providing information on the moisture distribution within the aquifer, this approach can reasonably predict the water table fluctuations in response to periodic forcing across a sloping boundary. Furthermore, he coupled ground-surface water model accurately predicts the extent of the seepage face formed at the sloping boundary. (C) 2005 Elsevier Ltd. All rights reserved.

Assessing flow in physical activity: The Flow State Scale-2 and Dispositional Flow Scale-2

The Flow State Scale-2 (FSS-2) and Dispositional Flow Scale-2 (DFS-2) are presented as two self-report instruments designed to assess flow experiences in physical activity. Item modifications were made to the original versions of these scales in order to improve the measurement of some of the flow dimensions. Confirmatory factor analyses of an item identification and a cross-validation sample demonstrated a good fit of the new scales. There was support for both a 9-first-order factor model and a higher order model with a global flow factor. The item identification sample yielded mean item loadings on the first-order factor of .78 for the FSS-2 and .77 for the DFS-2. Reliability estimates ranged from .80 to .90 for the FSS-2, and .81 to .90 for the DFS-2. In the cross-validation sample, mean item loadings on the first-order factor were .80 for the FSS-2, and .73 for the DFS-2. Reliability estimates ranged between .80 to .92 for the FSS-2 and .78 to .86 for the DFS-2. The scales are presented as ways of assessing flow experienced within a particular event (FSS-2) or the frequency of flow experiences in chosen physical activity in general (DFS-2).

Marker concentration patterns of labelled leaf and stem particles in the rumen of cattle grazing bermuda grass (Cynodon dactylon) analysed by reference to a raft model

Large (>1600 mum), ingestively masticated particles of bermuda grass (Cynodon dactylon L. Pers.) leaf and stem labelled with Yb-169 and Ce-144 respectively were inserted into the rumen digesta raft of heifers grazing bermuda grass. The concentration of markers in digesta sampled from the raft and ventral rumen were monitored at regular intervals over approximately 144 h. The data from the two sampling sites were simultaneously fitted to two pool (raft and ventral rumen-reticulum) models with either reversible or sequential flow between the two pools. The sequential flow model fitted the data equally as well as the reversible flow model but the reversible flow model was used because of its greater application. The reversible flow model, hereafter called the raft model, had the following features: a relatively slow age-dependent transfer rate from the raft (means for a gamma 2 distributed rate parameter for leaf 0.0740 v. stem 0.0478 h(-1)), a very slow first order reversible flow from the ventral rumen to the raft (mean for leaf and stem 0.010 h(-1)) and a very rapid first order exit from the ventral rumen (mean of leaf and stem 0.44 h(-1)). The raft was calculated to occupy approximately 0.82 total rumen DM of the raft and ventral rumen pools. Fitting a sequential two pool model or a single exponential model individually to values from each of the two sampling sites yielded similar parameter values for both sites and faster rate parameters for leaf as compared with stem, in agreement with the raft model. These results were interpreted as indicating that the raft forms a large relatively inert pool within the rumen. Particles generated within the raft have difficulty escaping but once into the ventral rumen pool they escape quickly with a low probability of return to the raft. It was concluded that the raft model gave a good interpretation of the data and emphasized escape from and movement within the raft as important components of the residence time of leaf and stem particles within the rumen digesta of cattle.

Effects of temperature-dependent viscosity variation on entropy generation, heat and fluid flow through a porous-saturated duct of rectangular cross-section

Effect of temperature-dependent viscosity on fully developed forced convection in a duct of rectangular cross-section occupied by a fluid-saturated porous medium is investigated analytically. The Darcy flow model is applied and the viscosity-temperature relation is assumed to be an inverse-linear one. The case of uniform heat flux on the walls, i.e. the H boundary condition in the terminology of Kays and Crawford, is treated. For the case of a fluid whose viscosity decreases with temperature, it is found that the effect of the variation is to increase the Nusselt number for heated walls. Having found the velocity and the temperature distribution, the second law of thermodynamics is invoked to find the local and average entropy generation rate. Expressions for the entropy generation rate, the Bejan number, the heat transfer irreversibility, and the fluid flow irreversibility are presented in terms of the Brinkman number, the Péclet number, the viscosity variation number, the dimensionless wall heat flux, and the aspect ratio (width to height ratio). These expressions let a parametric study of the problem based on which it is observed that the entropy generated due to flow in a duct of square cross-section is more than those of rectangular counterparts while increasing the aspect ratio decreases the entropy generation rate similar to what previously reported for the clear flow case.

Modelling solute transport in structured soils: Performance evaluation of the ADR and TRM models

The movement of chemicals through the soil to the groundwater or discharged to surface waters represents a degradation of these resources. In many cases, serious human and stock health implications are associated with this form of pollution. The chemicals of interest include nutrients, pesticides, salts, and industrial wastes. Recent studies have shown that current models and methods do not adequately describe the leaching of nutrients through soil, often underestimating the risk of groundwater contamination by surface-applied chemicals, and overestimating the concentration of resident solutes. This inaccuracy results primarily from ignoring soil structure and nonequilibrium between soil constituents, water, and solutes. A multiple sample percolation system (MSPS), consisting of 25 individual collection wells, was constructed to study the effects of localized soil heterogeneities on the transport of nutrients (NO3-, Cl-, PO43-) in the vadose zone of an agricultural soil predominantly dominated by clay. Very significant variations in drainage patterns across a small spatial scale were observed tone-way ANOVA, p < 0.001) indicating considerable heterogeneity in water flow patterns and nutrient leaching. Using data collected from the multiple sample percolation experiments, this paper compares the performance of two mathematical models for predicting solute transport, the advective-dispersion model with a reaction term (ADR), and a two-region preferential flow model (TRM) suitable for modelling nonequilibrium transport. These results have implications for modelling solute transport and predicting nutrient loading on a larger scale. (C) 2001 Elsevier Science Ltd. All rights reserved.

Experimental investigation of liquid flow shift due to gas cross flow in non-wetted packed beds

An experimental study has been carried out for the gas-liquid two-phase flow in a packed bed simulating conditions of the gas and liquid flows in the lower part of blast furnace. The localised liquid flow phenomenon in presence of gas cross flow, which usually occurs around the cohesive zone and raceway in blast furnace, was investigated in detail. Such liquid flow is characterised in terms of liquid shift distance or liquid shift angle that can effectively be measured by the experiments involved in the current study. It is found that liquid shift angle does not significantly increase or decrease with different packing depth. This finding supports the hypothesis of the force balance model where a vectorial relationship among acting forces, i.e. gas drag force, gravitational force and solid-liquid friction force, and liquid shift angle does exist. Liquid shift angle is inversely proportional to particle size and liquid density, and proportional to square of gas superficial velocity, but is almost independent on liquid flowrate and liquid viscosity. The gas-liquid drag coefficient, an important aspect for quantifying the interaction between gas and liquid flows, was conceptually modified based on the discrete feature of liquid flow through a packed bed and evaluated by the combined theoretical and experimental investigation. Experimental measurements suggest that the gas-liquid drag coefficient is approximately a constant (C-DG(')=5.4+/-1.0) and is independent on liquid properties, gas velocity and packing structure. The result shows a good agreement with previous experimental data and prediction of the existing liquid flow model.

A dynamic mathematical model for sequential leach bed anaerobic digestion of organic fraction of municipal solid waste

A mathematical model that describes the operation of a sequential leach bed process for anaerobic digestion of organic fraction of municipal solid waste (MSW) is developed and validated. This model assumes that ultimate mineralisation of the organic component of the waste occurs in three steps, namely solubilisation of particulate matter, fermentation to volatile organic acids (modelled as acetic acid) along with liberation of carbon dioxide and hydrogen, and methanogenesis from acetate and hydrogen. The model incorporates the ionic equilibrium equations arising due to dissolution of carbon dioxide, generation of alkalinity from breakdown of solids and dissociation of acetic acid. Rather than a charge balance, a mass balance on the hydronium and hydroxide ions is used to calculate pH. The flow of liquid through the bed is modelled as occurring through two zones-a permeable zone with high flushing rates and the other more stagnant. Some of the kinetic parameters for the biological processes were obtained from batch MSW digestion experiments. The parameters for flow model were obtained from residence time distribution studies conducted using tritium as a tracer. The model was validated using data from leach bed digestion experiments in which a leachate volume equal to 10% of the fresh waste bed volume was sequenced. The model was then tested, without altering any kinetic or flow parameters, by varying volume of leachate that is sequenced between the beds. Simulations for sequencing/recirculating 5 and 30% of the bed volume are presented and compared with experimental results. (C) 2002 Elsevier Science B.V. All rights reserved.

Modeling molecular transport in slit pores

We examine the transport of methane in microporous carbon by performing equilibrium and nonequilibrium molecular dynamics simulations over a range of pore sizes, densities, and temperatures. We interpret these simulation results using two models of the transport process. At low densities, we consider a molecular flow model, in which intermolecular interactions are neglected, and find excellent agreement between transport diffusion coefficients determined from simulation, and those predicted by the model. Simulation results indicate that the model can be applied up to fluid densities of the order to 0.1-1 nm(-3). Above these densities, we consider a slip flow model, combining hydrodynamic theory with a slip condition at the solid-fluid interface. As the diffusion coefficient at low densities can be accurately determined by the molecular flow model, we also consider a model where the slip condition is supplied by the molecular flow model. We find that both density-dependent models provide a useful means of estimating the transport coefficient that compares well with simulation. (C) 2004 American Institute of Physics.

Heat transfer and entropy generation optimization of forced convection in a porous-saturated duct of rectangular cross-section

We investigate analytically the first and the second law characteristics of fully developed forced convection inside a porous-saturated duct of rectangular cross-section. The Darcy-Brinkman flow model is employed. Three different types of thermal boundary conditions are examined. Expressions for the Nusselt number, the Bejan number, and the dimensionless entropy generation rate are presented in terms of the system parameters. The conclusions of this analytical study will make it possible to compare, evaluate, and optimize alternative rectangular duct design options in terms of heat transfer, pressure drop, and entropy generation. (c) 2006 Elsevier Ltd. All rights reserved.

Thermally developing Brinkman–Brinkman forced convection in rectangular ducts with isothermal walls

The Extended Weighted Residuals Method (EWRM) is applied to investigate the effects of viscous dissipation on the thermal development of forced convection in a porous-saturated duct of rectangular cross-section with isothermal boundary condition. The Brinkman flow model is employed for determination of the velocity field. The temperature in the flow field was computed by utilizing the Green’s function solution based on the EWRM. Following the computation of the temperature field, expressions are presented for the local Nusselt number and the bulk temperature as a function of the dimensionless longitudinal coordinate. In addition to the aspect ratio, the other parameters included in this computation are the Darcy number, viscosity ratio, and the Brinkman number.

Analysis of heat transfer and entropy generation for a thermally developing Brinkman–Brinkman forced convection problem in a rectangular duct with isoflux walls

Heat transfer and entropy generation analysis of the thermally developing forced convection in a porous-saturated duct of rectangular cross-section, with walls maintained at a constant and uniform heat flux, is investigated based on the Brinkman flow model. The classical Galerkin method is used to obtain the fully developed velocity distribution. To solve the thermal energy equation, with the effects of viscous dissipation being included, the Extended Weighted Residuals Method (EWRM) is applied. The local (three dimensional) temperature field is solved by utilizing the Green’s function solution based on the EWRM where symbolic algebra is being used for convenience in presentation. Following the computation of the temperature field, expressions are presented for the local Nusselt number and the bulk temperature as a function of the dimensionless longitudinal coordinate, the aspect ratio, the Darcy number, the viscosity ratio, and the Brinkman number. With the velocity and temperature field being determined, the Second Law (of Thermodynamics) aspect of the problem is also investigated. Approximate closed form solutions are also presented for two limiting cases of MDa values. It is observed that decreasing the aspect ratio and MDa values increases the entropy generation rate.