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.

A Simple Accounting-based Valuation Model for the Debt Tax Shield

This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that accounts for the tax benefit that comes from borrowing to raise cash for the operations. The model assumes that the firm maintains a deterministic financial leverage ratio, which tends to converge quickly to typical steady-state levels over time. From a practical point of view, this characteristic is of particular help, because it allows a continuing value calculation at the end of a short forecast period.

Decision-usefulness of ideal cost- and ideal value accounting for valuation and stewardship

This paper contrasts the decision-usefulness of prototype accounting regimes based on perfect accounting for value, i.e. ideal value accounting (IVA), and perfect matching of cost, i.e. ideal cost accounting (ICA). The regimes are analyzed in the context of a firm with overlapping capacity investments where projects earn excess returns and residual income is utilized as performance indicator. Provided that IVA and ICA systematically differ based on the criterion of unconditional conservatism, we assess their respective decision-usefulness for different valuation- and stewardship-scenarios. Assuming that addressees solely observe current accounting data of the firm, ICA provides information which is useful for valuation and stewardship without reservation whereas IVA entails problems under specific assumptions.

Knowledge and valuation of Andean agroforestry species: the role of sex, age, and migration among members of a rural community in Bolivia

Background Agroforestry is a sustainable land use method with a long tradition in the Bolivian Andes. A better understanding of people’s knowledge and valuation of woody species can help to adjust actor-oriented agroforestry systems. In this case study, carried out in a peasant community of the Bolivian Andes, we aimed at calculating the cultural importance of selected agroforestry species, and at analysing the intracultural variation in the cultural importance and knowledge of plants according to peasants’ sex, age, and migration. Methods Data collection was based on semi-structured interviews and freelisting exercises. Two ethnobotanical indices (Composite Salience, Cultural Importance) were used for calculating the cultural importance of plants. Intracultural variation in the cultural importance and knowledge of plants was detected by using linear and generalised linear (mixed) models. Results and discussion The culturally most important woody species were mainly trees and exotic species (e.g. Schinus molle, Prosopis laevigata, Eucalyptus globulus). We found that knowledge and valuation of plants increased with age but that they were lower for migrants; sex, by contrast, played a minor role. The age effects possibly result from decreasing ecological apparency of valuable native species, and their substitution by exotic marketable trees, loss of traditional plant uses or the use of other materials (e.g. plastic) instead of wood. Decreasing dedication to traditional farming may have led to successive abandonment of traditional tool uses, and the overall transformation of woody plant use is possibly related to diminishing medicinal knowledge. Conclusions Age and migration affect how people value woody species and what they know about their uses. For this reason, we recommend paying particular attention to the potential of native species, which could open promising perspectives especially for the young migrating peasant generation and draw their interest in agroforestry. These native species should be ecologically sound and selected on their potential to provide subsistence and promising commercial uses. In addition to offering socio-economic and environmental services, agroforestry initiatives using native trees and shrubs can play a crucial role in recovering elements of the lost ancient landscape that still forms part of local people’s collective identity.

Valuation of ecosystem goods and services. Part 2: Implications of unpredictable novel change

This is the second part of a two-part paper which offers a new approach to the valuation of ecosystem goods and services. In the first part a simple pre-industrial model was introduced to show how the interdependencies between the three subsystems, society, economy and nature, influence values, and how values change over time. In this second part the assumption of perfect foresight is dropped. I argue that due to novelty and complexity ex ante unpredictable change occurs within the three subsystems society, economy and nature. Again the simple pre-industrial model, which was introduced in part 1, serves as a simple paradigm to show how unpredictable novel change limits the possibility to derive accurate estimates of values.

What constitutes vulnerable self-esteem? Comparing the prospective effects of low, unstable, and contingent self-esteem on depressive symptoms

A growing body of longitudinal studies suggests that low self-esteem is a risk factor for depression. However, it is unclear whether other characteristics of self-esteem, besides its level, explain incremental or even greater variance in subsequent depression. We examined the prospective effects of self-esteem level, instability (i.e., the degree of variability in self-esteem across short periods), and contingency (i.e., the degree to which self-esteem fluctuates in response to self-relevant events) on depressive symptoms in 1 overarching model, using data from 2 longitudinal studies. In Study 1, 372 adults were assessed at 2 waves over 6 months, including 40 daily diary assessments at Wave 1. In Study 2, 235 young adults were assessed at 2 waves over 6 weeks, including about 6 daily diary assessments at each wave. Self-esteem contingency was measured by self-report and by a statistical index based on the diary data (capturing event-related fluctuations in self-esteem). In both studies self-esteem level, but not self-esteem contingency, predicted subsequent depressive symptoms. Self-esteem instability predicted subsequent depressive symptoms in Study 2 only, with a smaller effect size than self-esteem level. Also, level, instability, and contingency of self-esteem did not interact in the prediction of depressive symptoms. Moreover, the effect of self-esteem level held when controlling for neuroticism and for all other Big Five personality traits. Thus, the findings provide converging evidence for a vulnerability effect of self-esteem level, tentative evidence for a smaller vulnerability effect of self-esteem instability, and no evidence for a vulnerability effect of self-esteem contingency.