Investment Valuation with Tax-optimized Financing Decisions and a Tax-optimized Default Alternative

In this paper we evaluate an indivisible investment project that is carried out in a corporation under very simple premises. In particular, we discuss a one-period model with certainty, the pure domestic case and proportional tax rates. Surprisingly, the decision problem turns out to be rather complex if one has to make allowance for different taxation of the corporation and its owner. Altogether there are more than 10 cases that have to be distinguished if the firm's managers want to make a correct decision, depending on the relation of personal and corporate tax rates.

Profiting from the Cattle Cycle: Alternative Cow Herd Investment Strategies

Beef cow herd owners can benefit from incorporating price signals into their heifer retention decisions. Whereas a perfect forecast of calf prices over the productive life of the heifer added to the herd would be ideal, such information is not available. However, simple decision rules that incorporate current or recent prices and the knowledge that the cattle cycle likely will repeat itself can help producers improve their investment decisions. A dollar cost averaging strategy that retains the same dollar value of heifers each year and a rolling average value strategy that retains a 10-year average value of heifers out performed strategies that sought to maintain a constant herd size or a constant cash flow.

Alternative Cow Herd Investment Strategies: Constant Size and Constant Investment

Two heifer replacement strategies were compared over a 25-year period. One strategy retained the same number of heifers each year to maintain a constant herd size. The second strategy retained the same dollar value of heifer calves each year based on their opportunity cost as feeder calves. The constant investment strategy herd size varied throughout the period, but generated higher average profit and higher net worth than did the constant herd size strategy. Constant investment is a simple strategy to adjust the level of investment in beef cows and the resource base (pasture, labor, winter feed) in response to market signals driven by the cattle cycle. This strategy automatically increases heifer retention when the opportunity cost is low and reduces the number retained when cost is high. The effect is a lower average cost of cows in the herd, lower overall investment, and a higher net return on investment. Iowa producers, who often have greater flexibility in land use than producers in other major beef cow regions, can better utilize this strategy that generates greater profits and net worth growth.

Subordinate removal affects parental investment, but not offspring survival in a cooperative cichlid

Summary Subordinates in cooperative breeding systems may provide help to dominant pairs, who can benefit by either an increased total investment in their current brood or a reduced personal contribution to this investment. In the social cichlid Julidochromis ornatus, one large male subordinate generally spends 90% of his time in close proximity to the breeding shelter, whereas the dominants only spend 50% of their time close to the shelter. We experimentally removed the large subordinate for 30 days (approximating one breeding cycle) to study the investment strategies of dominants and the effects on offspring survival, while accounting for subordinate immigration. Experimental groups were compared with control groups, from which subordinates were also caught but not removed. On day one following removal, we tested whether dominants overcompensated, fully compensated or undercompensated for absence of the subordinate on several parental behaviours. Moreover, we tested whether the pairs' potential compensatory behaviour remained high seven days following large subordinate removal. One day following removal, dominants increased their time spent in the territory and their frequency of breeding shelter visits and defence, compared with the pre-removal phase and control groups. The dominant pair overcompensated for the loss of subordinate help in their breeding shelter visits, fully compensated in defence and undercompensated their time spent in the territory. Seven days after large subordinate removal, behavioural differences between treatments had disappeared. However, when distinguishing between groups with or without a new immigrant subordinate, dominant pairs only diminished investment in the presence of an immigrant, suggesting a compensatory role of the large subordinate. Finally, survival of juvenile group members was not affected by the treatment. Our experiments indicate that the presence of a large subordinate does not increase the dominant pairs' current reproductive success, but instead allows them to reduce their personal contribution to investment in the current brood. In addition, we illustrate that dominants may show strikingly different compensatory responses depending on the type of behaviour and emphasize the importance of immigrant subordinates to relieve dominants from costly compensatory responses in cooperative breeding systems.

Genetic testing for glucokinase mutations in clinically selected patients with MODY: a worthwhile investment

The differential diagnosis for children with diabetes includes a group of monogenic diabetic disorders known as maturity-onset diabetes of the young (MODY). So far, six underlying gene defects have been identified. The most common subtypes are caused by mutations in the genes encoding the transcription factor HNF-1a (MODY 3) and the glycolytic enzyme glucokinase (GCK) (MODY 2). MODY 2 is the most benign form of diabetes as the threshold for glucose sensing is elevated resulting in mild, regulated hyperglycemia. MODY 2 may usually be treated with diet alone without risk of microvascular complications. Patients with MODY usually present as children or young adults. Genetic testing for MODY in diabetic subjects is often not performed because of the costs and its unavailability in Switzerland. We describe the impact of the genetic analysis for MODY 2 on diabetes management and treatment costs in a five-year-old girl. The patient and her diabetic mother were both found to have a heterozygous missense mutation (V203A) in the glucokinase gene. The five-year-old girl was started on insulin therapy for her diabetes but because her HbA1c remained between 5.8-6.4% (reference 4.1-5.7%) and her clinical presentation suggested MODY insulin was discontinued. She is now well controlled on a carbohydrate controlled diet regimen only. Omission of insulin treatment made regular blood glucose monitoring unnecessary and removed her risk of hypoglycemia. Costs for the genetic analysis were 500 Euro. At our centre costs for diabetes care of a patient with type 1 diabetes are approximately 2050 Euro/year compared to 410 Euro/year for the care of a patient with MODY 2. In addition, a diagnosis of MODY 2 may reassure patients and their families, as microvascular complications are uncommon. Thus there are both health and financial benefits in diagnosing MODY 2. We recommend genetic testing for MODY 2 in clinically selected patients even though this analysis is currently not available in Switzerland and costs are not necessarily covered by the health insurances.

Reproductive investment and seedling survival of the mast-fruiting rain forest tree, Microberlinia bisulcata A. chev

In the southern part of Korup National Park, Cameroon, the mast fruiting tree Microberlinia bisulcata occurs as a codominant in groves of ectomycorrhizal Caesalpiniaceae within a mosaic of otherwise species-rich lowland rain forest. To estimate the amount of carbon and nutrients invested in reproduction during a mast fruiting event, and the consequential seed and seedling survival, three related field studies were made in 1995. These provided a complete seed and seedling budget for the cohort. Seed production was estimated by counting woody pods on the forest floor. Trees produced on average 26,000 (range 0-92,000) seeds/tree, with a dry mass of 16.6 kg/tree. Seeds were contained in woody pods of mass 307 kg/tree. Dry mass production of pods and seeds was 1034 kg ha(-1), equivalent to over half (55%) of annual leaf litterfall for this species, and contained 13% of the nitrogen and 21% of the phosphorus in annual leaf litterfall. Seed and young-seedling mortality was investigated with open quadrats and cages to exclude vertebrate predators, at two distances from the parent tree. The proportion of seeds on the forest floor which disappeared in the first 6 wk after dispersal was 84%, of which 26.5% was due to likely vertebrate removal, 36% to rotting, and 21.5% to other causes. Vertebrate predation was greater close to the stem than 5 m beyond the crown (41 vs 12% of seeds disappearing) where the seed shadow was less dense. Previous studies have demonstrated an association between mast years at Korup and high dry-season radiation before flowering, and have shown lower leaf-litterfall phosphorus concentrations following mast fruiting. The emerging hypothesis is that mast fruiting is primarily imposed by energy limitation for fruit production, but phosphorus supply and vertebrate predation are regulating factors. Recording the survival of naturally-regenerating M. bisulcata seedlings (6-wk stage) showed that 21% of seedlings survived to 31 mo. A simple three-stage recruitment model was constructed. Mortality rates were initially high and peaked again in each of the next two dry seasons, with smaller peaks in the two intervening wet seasons, these latter coinciding with annual troughs in radiation. The very poor recruitment of M. bisulcata trees in Korup, demonstrated in previous investigations, appears not to be due to a limitation in seed or young-seedling supply, but rather by factors operating at the established-seedling stage.

Food Security and Agri-Foreign Direct Investment in Weak States: Finding the Governance Gap to Avoid ‘Land Grab’

Food security is important. A rising world population coupled with climate change creates growing pressure on global world food supplies. States alleviate this pressure domestically by attracting agri-foreign direct investment (agri-FDI). This is a high-risk strategy for weak states: the state may gain valuable foreign currency, technology and debt-free growth; but equally, investors may fail to deliver on their commitments and exploit weak domestic legal infrastructure to ‘grab’ large areas of prime agricultural land, leaving only marginal land for domestic production. A net loss to local food security and to the national economy results. This is problematic because the state must continue to guarantee its citizens’ right to food and property. Agri-FDI needs close regulation to maximise its benefit. This article maps the multilevel system of governance covering agri-FDI. We show how this system creates asymmetric rights in favour of the investor to the detriment of the host state’s food security and how these problems might be alleviated.

Foreign Direct Investment in Agriculture: Land Grab or Food Security Improvement?

“Large-scale acquisition of land by foreign investors” is the correct term for a process where the verdict of guilt is often quicker than the examination. But is there something really new about land grab except in its extent? In comparison with colonial and post-colonial plantation operations, should foreign investors today behave differently? We generally accept coffee and banana exports as pro-growth and pro-development, just as for cars, beef and insurance. What then is wrong with an investment contract allowing the holder to buy a farm and to export wheat to Saudi Arabia, or soybeans and maize as cattle feed to Korea, or to plant and process sugar cane and palm oil into ethanol for Europe and China? Assuming their land acquisition was legal, should foreigners respect more than investment contracts and national legislation? And why would they not take advantage of the legal protection offered by international investment law and treaties, not to speak of concessional finance, infrastructure and technical cooperation by a development bank, or the tax holidays offered by the host state? Remember Milton Friedman’s often-quoted quip: “The business of business is business!” And why would the governments signing those contracts not know whether and which foreign investment projects are best for their country, and how to attract them? This chapter tries to show that land grab, where it occurs, is not only yet another symptom of regulatory failures at the national level and a lack of corporate social responsibility by certain private actors. National governance is clearly the most important factor. Nonetheless, I submit that there is an international dimension involving investor home states in various capacities. The implication is that land grab is not solely a question whether a particular investment contract is legal or not. This chapter deals with legal issues which seem to have largely escaped the attention of both human rights lawyers and, especially, of investment lawyers. I address this fragmentation between different legal disciplines, rules, and policies, by asking two basic questions: (i) Do governments and parliaments in investor home countries have any responsibility in respect of the behaviour of their investors abroad? (ii) What should they and international regulators do, if anything?