I explore methods that characterize model-based valuation of stochastically growing cash flows. Following previous research, I use stochastic discount factors as a convenient device to depict asset values. I extend that literature by focusing on the impact of compounding these discount factors over alternative investment horizons. In modeling cash flows, I also incorporate stochastic growth fac...

Abstract In this paper, Markov chain and dynamic programming were used to represent a suitable pattern for tax relief and tax evasion decrease based on tax earnings in Iran from 2005 to 2009. Results, by applying this model, showed that tax evasion were 6714 billion Rials**. With 4% relief to tax payers and by calculating present value of the received tax, it was reduced to 3108 billion Rials. ...

The Telecommunications Act of 1996 required that charges for interconnection, universal service and unbundled network elements should be based on cost, and directed the Federal Communications Commission to implement this legislation. The parties developed engineering process models to estimate forward-looking costs. Both the engineering economics and the cost model approaches were unsatisfactor...

This paper attempts to determine the certainty equivalent of an uncertain future cash flow or value through the option pricing method, and builds models of certainty equivalent and certainty equivalent coefficient. Based on the model of certainty equivalent coefficient, this paper further derives models of risk premium and risk-adjusted discount rate. The latter is a new capital asset pricing m...

Prediction of stock returns has always been one of the most important issues in finance. Investors have attracted to use of Fama-French Five-Factor Model (FFFFM) as one of the powerful methods for pricing financial assets and predicting the stock returns. This research investigates the predictability of stock returns by including some important firms features namely cash holdings, dividend rate...

Many important risky projects are characterized by stochastic processes embedded in non-linear, feedback structures with delays. System dynamics models may be used to estimate the cash flow resulting from these projects. If these projects include managerial flexibility (real options), a correct financial evaluation of these cash flow requires the use of real options methodology. We adapt prior ...

Traditional project investment methods, such as the discounted cash flow (DCF) with a fixed static plan, are no longer sufficient to assist the corporate strategies of seizing opportunities and profitability. The option pricing formula includes a theoretical framework for pricing financial options, assuming that the risk in a financial hedged position is zero, if the option is adjusted continuo...

Non-linear external habit persistence models, which feature prominently in the recent “equity premium” asset pricing and macroeconomics literature, generate counterfactual predictions in the cross-section of stock returns. In particular, we show that in the absence of crosssectional heterogeneity in firms’ cash-flow risk, these models produce a “growth premium,” that is, stocks with high price-...

Diversified firms can trade at a discount to a matched portfolio of single-segment firms either because diversified firms have lower expected cash flows or because they have higher expected returns. We analyze whether diversification-discount firms have higher expected returns in order to compensate investors for offering less upside potential (or skewness exposure) than focused firms. Our empi...

issuance value, redemption value and net value of issuance and redemption of investment units is called cash flow to mutual funds. this cash flow to mutual funds is used as an investor sentiment index, when there is significant relationship between cash flow to mutual funds and market return. in this paper, relationship between these two items is to be evaluated. monthly and weekly cash flow to...