Discounted cash flow: accounting for uncertainty

Valuation is the process of estimating price. The methods used to determine value attempt to model the thought processes of the market and thus estimate price by reference to observed historic data. This can be done using either an explicit model, that models the worth calculation of the most likely bidder, or an implicit model, that that uses historic data suitably adjusted as a short cut to determine value by reference to previous similar sales. The former is generally referred to as the Discounted Cash Flow (DCF) model and the latter as the capitalisation (or All Risk Yield) model. However, regardless of the technique used, the valuation will be affected by uncertainties. Uncertainty in the comparable data available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the estimate of price. In a previous paper, we have considered the way in which uncertainty is allowed for in the capitalisation model in the UK. In this paper, we extend the analysis to look at the way in which uncertainty can be incorporated into the explicit DCF model. This is done by recognising that the input variables are uncertain and will have a probability distribution pertaining to each of them. Thus buy utilising a probability-based valuation model (using Crystal Ball) it is possible to incorporate uncertainty into the analysis and address the shortcomings of the current model. Although the capitalisation model is discussed, the paper concentrates upon the application of Crystal Ball to the Discounted Cash Flow approach.

Induction of the ferritin gene (ftnA) of Escherichia coli by Fe2+–Fur is mediated by reversal of H-NS silencing and is RyhB independent

FtnA is the major iron-storage protein of Escherichia coli accounting for < or = 50% of total cellular iron. The FtnA gene (ftnA) is induced by iron in an Fe(2+)-Fur-dependent fashion. This effect is reportedly mediated by RyhB, the Fe(2+)-Fur-repressed, small, regulatory RNA. However, results presented here show that ftnA iron induction is independent of RyhB and instead involves direct interaction of Fe(2+)-Fur with an 'extended' Fur binding site (containing five tandem Fur boxes) located upstream (-83) of the ftnA promoter. In addition, H-NS acts as a direct repressor of ftnA transcription by binding at multiple sites (I-VI) within, and upstream of, the ftnA promoter. Fur directly competes with H-NS binding at upstream sites (II-IV) and consequently displaces H-NS from the ftnA promoter (sites V-VI) which in turn leads to derepression of ftnA transcription. It is proposed that H-NS binding within the ftnA promoter is facilitated by H-NS occupation of the upstream sites through H-NS oligomerization-induced DNA looping. Consequently, Fur displacement of H-NS from the upstream sites prevents cooperative H-NS binding at the downstream sites within the promoter, thus allowing access to RNA polymerase. This direct activation of ftnA transcription by Fe(2+)-Fur through H-NS antisilencing represents a new mechanism for iron-induced gene expression.

A wind-tunnel study of flow distortion at a meteorological sensor on top of the BT Tower, London, UK

High quality wind measurements in cities are needed for numerous applications including wind engineering. Such data-sets are rare and measurement platforms may not be optimal for meteorological observations. Two years' wind data were collected on the BT Tower, London, UK, showing an upward deflection on average for all wind directions. Wind tunnel simulations were performed to investigate flow distortion around two scale models of the Tower. Using a 1:160 scale model it was shown that the Tower causes a small deflection (ca. 0.5°) compared to the lattice on top on which the instruments were placed (ca. 0–4°). These deflections may have been underestimated due to wind tunnel blockage. Using a 1:40 model, the observed flow pattern was consistent with streamwise vortex pairs shed from the upstream lattice edge. Correction factors were derived for different wind directions and reduced deflection in the full-scale data-set by <3°. Instrumental tilt caused a sinusoidal variation in deflection of ca. 2°. The residual deflection (ca. 3°) was attributed to the Tower itself. Correction of the wind-speeds was small (average 1%) therefore it was deduced that flow distortion does not significantly affect the measured wind-speeds and the wind climate statistics are reliable.

Particle image velocimetry measurements of turbulent flow within outdoor and indoor urban scale models and flushing motions in urban canopy layers

We investigate the spatial characteristics of urban-like canopy flow by applying particle image velocimetry (PIV) to atmospheric turbulence. The study site was a Comprehensive Outdoor Scale MOdel (COSMO) experiment for urban climate in Japan. The PIV system captured the two-dimensional flow field within the canopy layer continuously for an hour with a sampling frequency of 30 Hz, thereby providing reliable outdoor turbulence statistics. PIV measurements in a wind-tunnel facility using similar roughness geometry, but with a lower sampling frequency of 4 Hz, were also done for comparison. The turbulent momentum flux from COSMO, and the wind tunnel showed similar values and distributions when scaled using friction velocity. Some different characteristics between outdoor and indoor flow fields were mainly caused by the larger fluctuations in wind direction for the atmospheric turbulence. The focus of the analysis is on a variety of instantaneous turbulent flow structures. One remarkable flow structure is termed 'flushing', that is, a large-scale upward motion prevailing across the whole vertical cross-section of a building gap. This is observed intermittently, whereby tracer particles are flushed vertically out from the canopy layer. Flushing phenomena are also observed in the wind tunnel where there is neither thermal stratification nor outer-layer turbulence. It is suggested that flushing phenomena are correlated with the passing of large-scale low-momentum regions above the canopy.

Minimum recovery time between reactive hyperemia stimulus in the repeated measurement of brachial flow-mediated dilatation.

The ability to undertake repeat measurements of flow-mediated dilatation (FMD) within a short time of a previous measurement would be useful to improve accuracy or to repeat a failed initial procedure. Although standard methods report that a minimum of 10 min is required between measurements, there is no published data to support this. Thirty healthy volunteers had five FMD measurements performed within a 2-h period, separated by various time intervals (5, 15 and 30 min). In 19 volunteers, FMD was also performed as soon as the vessel had returned to its baseline diameter. There was no significant difference between any of the FMD measurements or parameters across the visits indicating that repeat measurements may be taken after a minimum of 5 min or as soon as the vessel has returned to its baseline diameter, which in some subjects may be less than 5 min.

On the relationship between the Indian summer monsoon and river flow in the Aral Sea basin

We study the contemporaneous relationship between the intensity of the Indian Summer Monsoon (ISM) and runoff in the major rivers of the Aral Sea basin (Amudarya, Syrdarya) and some of their subcatchments. To this end, we use All-India rainfall (AIR) data, CRU surface observations of precipitation and temperature, ERA40 atmospheric data, and natural discharge data corrected for human interference. We show that there is a highly significant positive correlation between ISM intensity and Amudarya runoff. This finding cannot be explained by the spill-over of ISM precipitation over the Hindu Kush into the Amudarya basin. Instead, we suggest that the observed co-variability is mediated by tropospheric temperature variations due to fluctuations in the ISM intensity. These variations are known to be due to Rossby-wave propagation in response to condensational heating during monsoon precipitation. We hypothesise that the corresponding anomalies in surface temperatures imply anomalies in meltwater formation.

Orientational behaviour of thermotropic and lyotropic liquid crystal polymer systems under shear flow

A comparison is made of the development of global orientation during shearing of lyotropic solutions of hydroxypropylcellulose with that observed for the thermotropic phase of hydroxypropylcellulose. At shear rates the behaviour of the two systems is similar, both during steady-state shear, and in terms of relaxation following cessation of shear flow. At low shear rates, the levels of orientation observed for the thermotropic system are substantially greater than observed for the lyotropic solutions. The relationship of these differences to variations in molecular parameters, viscous stress and to director tumbling is discussed.

A novel X-ray rheometer for in situ studies of polymer melts and solutions during shear flow

A novel X-ray rheometer based on a parallel plate geometry is described. This system allows time-resolved X-ray scattering intensity data to be obtained from polymeric samples subjected to shear flow. The range of quantitative structural parameters, such as molecular orientation and inter chain correlations, which can be obtained from the data is highlighted. Examples of the utility of X-ray scattering in examining optically opaque samples and the extraction of 〈P2〉 and 〈P4〉 orientation parameters are given using anisotropic hydroxypropylcellulose solutions as the sample.

WAXS studies of global molecular orientation induced in nematic liquid crystals by simple shear flow

Global molecular orientation function coefficients for the nematic liquid crystal 4-cyano 4'-nn -pentylbiphenyl (5CB) in shear flow are presented, being extracted from 2-dimensional Wide-Angle X-ray Scattering data. A linear increase in orientation parameter P2 is observed with a logarithmic increase in shear rate. It is proposed that this arises from an increased number of LC directors aligning to the shear axis. Upon cessation of shear flow, the anisotropy is seen to relax away completely, over a time scale which is inversely proportional to the previously applied shear rate.

The appraisal of data centres: deconstructing the cash flow

This paper analyses the appraisal of a specialized form of real estate - data centres - that has a unique blend of locational, physical and technological characteristics that differentiate it from conventional real estate assets. Market immaturity, limited trading and a lack of pricing signals enhance levels of appraisal uncertainty and disagreement relative to conventional real estate assets. Given the problems of applying standard discounted cash flow, an approach to appraisal is proposed that uses pricing signals from traded cash flows that are similar to the cash flows generated from data centres. Based upon ‘the law of one price’, it is assumed that two assets that are expected to generate identical cash flows in the future must have the same value now. It is suggested that the expected cash flow of assets should be analysed over the life cycle of the building. Corporate bond yields are used to provide a proxy for the appropriate discount rates for lease income. Since liabilities are quite diverse, a number of proxies are suggested as discount and capitalisation rates including indexed-linked, fixed interest and zero-coupon bonds.