Search results for: discount rate

Authors: Fredrik Hartwig, Peter Lindberg

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In 2004, the International Accounting Standards Board (IASB) issued new accounting standards for impairment testing of goodwill. IFRS 3 Business Combinations and IAS 36 Impairment of Assets prohibited amortization of acquired goodwill and instead required companies to test goodwill for impairment annually or more often if necessary. The goodwill impairment test is based on management’s judgement and estimations, making the impairment-only-approach subjective and unreliable. Management can use the discretion opportunistically by managing goodwill impairments. The IASB’s remedy to the reliability problem has been to demand transparent financial reports. IAS 36 paragraph 134 requires detailed disclosures regarding the impairment test in order to make potentially unreasonable assumptions and estimations visible. The disclosure requirements should thus (in theory) make it more difficult for management to ‘choose’ assumptions and estimations that suit an agenda. Whether the requirement to disclose detailed disclosures regarding the impairment test leads to less opportunism is however an empirical question. This work analyses whether one of the required disclosures in IAS 36 paragraph 134, the reported discount rate, differs from an independently estimated risk-adjusted discount rate. Estimates of discount rates that are either lower or higher than the independently estimated discount rate are here defined as opportunism. In the former case - i.e. when the reported discount rate is lower - the objective may be to avoid profit reducing impairment charges. In the latter case - i.e. when the reported discount rate is higher - the objective may be to reduce profits or take ‘big baths’. This paper differs in one important respect from previous similar studies, the majority of which are based on purely descriptive statistics; we use multivariate regression analysis to analyze what factors affect deviations between disclosed discount rates and independently estimated discount rates. The sample consists of Swedish and Finnish listed companies. Swedish and Finnish listed companies are analysed since the accounting oversight bodies differ between the two countries. The results show that discount rate deviations in Swedish and Finnish listed companies are significantly related to accounting oversight, size and industry but not financial risk, business risk and goodwill intensity.

Keywords: discount rate, manipulation, goodwill impairment test, disclosures

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Authors: Monika Foltyn-Zarychta

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Climate change mitigation investment activities are inevitably extended in time extremely. The project cycle does not last for decades – sometimes it stretches out for hundreds of years and the project outcomes impact several generations. The longevity of those activities raises multiple problems in the appraisal procedure. One of the pivotal issues is the choice of the discount rate, which affect tremendously the net present value criterion. The paper aims at estimating the value of social discount rate for intergenerational investment projects in Poland based on individual intertemporal preferences. The analysis is based on questionnaire surveying Polish citizens and designed as contingent valuation method. The analysis aimed at answering two questions: 1) whether the value of the individual discount rate decline with increased time of delay, and 2) whether the value of the individual discount rate changes with increased spatial distance toward the gainers of the project. The valuation questions were designed to identify respondent’s indifference point between lives saved today and in the future due to hypothetical project mitigating climate changes. Several project effects’ delays (of 10, 30, 90 and 150 years) were used to test the decline in value with time. The variability in regard to distance was tested by asking respondents to estimate their indifference point separately for gainers in Poland and in Latvia. The results show that as the time delay increases, the average discount rate value decreases from 15,32% for 10-year delay to 2,75% for 150-year delay. Similar values were estimated for Latvian beneficiaries. There should be also noticed that the average volatility measured by standard deviation also decreased with time delay. However, the results did not show any statistically significant difference in discount rate values for Polish and Latvian gainers. The results showing the decline of the discount rate with time prove the possible economic efficiency of the intergenerational effect of climate change mitigation projects and may induce the assumption of the altruistic behavior of present generation toward future people. Furthermore, it can be backed up by the same discount rate level declared by Polish for distant in space Latvian gainers. The climate change activities usually need significant outlays and the payback period is extremely long. The more precise the variables in the appraisal are, the more trustworthy and rational the investment decision is. The discount rate estimations for Poland add to the vivid discussion concerning the issue of climate change and intergenerational justice.

Keywords: climate change, social discount rate, investment appraisal, intergenerational justice

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Authors: Arjun Paul, Adrijit Goswami

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In our present work, an economic order quantity inventory model with shortages is developed where holding cost is expressed as linearly increasing function of time and demand rate is a ramp type function of time. The items considered in the model are deteriorating in nature so that a small fraction of the items is depleted with the passage of time. In order to consider a more realistic situation, the deterioration rate is assumed to follow a continuous uniform distribution with the parameters involved being triangular fuzzy numbers. The inventory manager offers his customer a discount in case he is willing to backorder his demand when there is a stock-out. The optimum ordering policy and the optimum discount offered for each backorder are determined by minimizing the total cost in a replenishment interval. For better illustration of our proposed model in both the crisp and fuzzy sense and for providing richer insights, a numerical example is cited to exemplify the policy and to analyze the sensitivity of the model parameters.

Keywords: fuzzy deterioration rate, price discount on backorder, ramp type demand, shortage, time varying holding cost

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Authors: Babak H. Tabrizi, Seyed Farid Ghaderi

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On-time availability of materials in the construction sites plays an outstanding role in successful achievement of project’s deliverables. Thus, this paper has investigated formulation of project scheduling and material procurement at the same time, by a mixed-integer programming model, aiming to minimize/maximize penalty/reward to deliver the project and minimize material holding, ordering, and procurement costs, respectively. We have taken both all-units and incremental discount possibilities into consideration to address more flexibility from the procurement side with regard to real world conditions. Finally, the applicability and efficiency of the mathematical model is tested by different numerical examples.

Keywords: discount strategies, material purchasing, project planning, project scheduling

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Authors: Babak H. Tabrizi, Seyed Farid Ghaderi

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Concurrent planning of the resource constraint project scheduling and material ordering problems have received significant attention within the last decades. Hence, the issue has been investigated here with the aim to minimize total project costs. Furthermore, the presented model considers different discount options in order to approach the real world conditions. The incorporated alternatives consist of all-unit and incremental discount strategies. On the other hand, a modified version of the genetic algorithm is applied in order to solve the model for larger sizes, in particular. Finally, the applicability and efficiency of the given model is tested by different numerical instances.

Keywords: genetic algorithm, material ordering, project management, project scheduling

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Authors: J. H. Lee

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As the internet and smartphone use increases, the E-Commerce is constantly growing. Therefore, the parcel is increasing continuously every year. If the larger amount than the processing capacity of the current facilities is received, they do not process, and the delivery quality becomes low. In this paper, therefore, we analyze comparatively at the cost perspective between the case of building a new facility for the increasing parcel volumes and the case of reorganizing the current operating system. We propose the optimal discount policy per parcel by calculating the construction cost of new automated facility and manual facilities until the construction of the new automated facility, and discount price.

Keywords: system reorganization, load balancing, parcel sorting, discount policy

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Authors: Arun Dhakal, Rajesh Kumar Rai

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Agroforestry is long practiced in Nepal as a means of subsistence livelihoods. Given its potential to climate change mitigation, this practice is being recommended as a climate-smart farming practice in the recent years. However, the financial attractiveness of this practice is not well-documented in a labor scarce economy such as Nepal. This study attempts to examine the financial suitability of an agroforestry-based farming practice in the present socio-economic context of Nepal where labor is in short supply. A total of 200 households were randomly selected for household surveys in Dhanusha district during April to July 2015. Two farming practices were found to be dominant in the study area: 1) conventional farming (field crops only) in which at least two field crops are annually grown, and 2) agroforestry-based farming (agroforest, home garden and field crops combined) practice (ABFP). The ABFP was found to be less labor intensive than the conventional farming (137 Man days/yr/ha vs 218 Man days/yr/ha). The ex-ante financial analysis indicated that both the farming practices generated positive NPVs (Net Present Values) and B/C (Benefit-Cost) ratios greater than one, indicating both are financially attractive farming enterprises under the base discount rate of 12%. However, the ABFP generated higher NPV and greater B/C ratio than the conventional farming, indicating the former was financially more attractive than the later. The sensitivity analysis showed that the conventional farming was more sensitive to change in labor wage rate than that of the ABFP. Up to the 24% discount rate, the ABFP generated higher NPV and in case of B/C ratio, the ratio was found greater for ABFP even in 50% discount rate.

Keywords: agroforestry, benefit-cost analysis, conventional farming, net present value

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Authors: Catherine Heyjung Sonu

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This paper examines the effect of accounting quality on the process in which stock price is determined by focusing on contribution-in-kind valuations using Korean setting. In Korea, a number of chaebol firms have transformed into holding company system starting in 2003. With an attempt to gain as much voting right, management sold shares of subsidiaries to purchase shares of the holding company. In so doing, management of these firms received share issues for the contribution in kind that has been made to obtain additional shares of the holding company. The price of these share issues against contribution in kind is allowed to be discounted up to 30%. Using this interesting setting in Korea, this paper examines whether accounting quality affects the extent of the discount applied to the share issues. If the accounting quality of the firm for which the management is receiving share issues is poor, the extent of discount is likely to be high. The extent of discount is likely lower for firms with superior accounting quality. Using 24 cases, we find that, on average, the extent of discount is larger for share issues in which the accounting quality, proxied by the absolute value of discretionary accruals, is poor. This paper provides insight by examining the effect of accounting quality on the stock market. It sheds light on the intersection between finance and accounting research and should be of interest to researchers and practitioners.

Keywords: Accounting quality, Contribution-in-kind, discount, holding company

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Authors: Junaid N. Chauhdary, Bernard A. Engel, Allah Bakhsh

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Solar powered tubewells can be a reliable and affordable source of supplying irrigation water compared with electric or diesel operated tubewells due to frequent load shedding and soaring energy prices. A study was conducted on a solar tubewell installed at the Water Management Research Center (WMRC), University of Agriculture, Faisalabad to investigate the viability of a solar powered tubewell in terms of discharge and benefit cost ratio. The tubewell discharge was 50 m3hr-1 with a total dynamic head of 30 m. The depth of bore was 31 m (14 m blind + 17 m screen) with a casing diameter of 15.2 cm (6 inches). A 3-stage submersible pump of 10.2 cm (4 inch) diameter was lowered in the casing to a depth of 22 m. The pump was powered from 21 solar panels of 200 W capacity each. The tubewell peak discharge was observed as 6 and 7 hr day-1 in winter and summer, respectively. The breakeven analysis of the solar tubewell showed that the payback period of the solar tubewell was 1.5 years of its 10 year usable life with an IRR (internal rate of return) of 69 %. The BCR (benefit cost ratio) of the solar tubewell at 2, 4, 6, and 8 percent discount rate were 3.75, 3.45, 3.19 and 2.96, respectively. The NPV (net present value) of the solar tubewell at 2, 4, 6, and 8 % discount rates were 1.89, 1.65, 1.45 and 1.27 million rupees, respectively. These results indicated that the solar powered tubewells are a viable option as well as environmentally friendly and can be adopted by the farmers due to their affordable payback period.

Keywords: benefit cost ratio, internal rate of return (IRR), net present value (NPV), solar tubewell

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Authors: Guan-Ying Chen, Han-Tsung Liou, Shou-Ren Hu

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To address traffic congestion problems and encourage the use of public transportation systems in the Taipei metropolitan area, the Taipei City Government and the New Taipei City Government implemented a monthly ticket policy on April 16, 2018. This policy offers unlimited rides on the Taipei MRT, Taipei City Bus, New Taipei City Bus, Danhai Light Rail, and Public Bike (YouBike) on a monthly basis. Additionally, both city governments replaced the smart card discount policy with a new frequent flyer discount program (referred to as the loyal customer program) on February 1, 2020, introducing a differential pricing policy. Specifically, the more frequently the Taipei MRT system is used, the greater the discounts users receive. To analyze the impact of the Taipei public transport monthly ticket policy and the frequent user discount program on the passenger volume of the Taipei MRT system and the transferring behaviors of MRT users, this study conducts a trip-chain analysis using transaction data from Taipei MRT smart cards between September 2017 and December 2020. To achieve these objectives, the study employs four indicators: 1) number of passengers, 2) average number of rides, 3) average trip distance, and 4) instances of multiple consecutive rides. The study applies the t-test and Mann-Kendall trend test to investigate whether the proposed indicators have changed over time due to the implementation of the discount policy. Furthermore, the study examines the travel behaviors of passengers who use monthly tickets. The empirical results of the study indicate that the implementation of the Taipei public transport monthly ticket policy has led to an increase in the average number of passengers and a reduction in the average trip distance. Moreover, there has been a significant increase in instances of multiple consecutive rides, attributable to the unlimited rides offered by the monthly tickets. The impact of the frequent user discount program on changes in MRT passengers is not as pronounced as that of the Taipei public transportation monthly ticket policy. This is partly due to the fact that the frequent user discount program is only applicable to the Taipei MRT system, and the passenger volume was greatly affected by the COVID-19 pandemic. The findings of this research can serve as a reference for Taipei MRT Corporation in formulating its fare strategy and can also provide guidance for the Taipei and New Taipei City Governments in evaluating differential pricing policies for public transportation systems.

Keywords: frequent user discount program, mass rapid transit, monthly ticket, smart card

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Authors: Babak H. Tabrizi, Seyed Farid Ghaderi

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Concurrent planning of project scheduling and material ordering can provide more flexibility to the project scheduling problem, as the project execution costs can be enhanced. Hence, the issue has been taken into account in this paper. To do so, a mixed-integer mathematical model is developed which considers the aforementioned flexibility, in addition to the materials quantity discount and space availability restrictions. Moreover, the activities duration has been treated as decision variables. Finally, the efficiency of the proposed model is tested by different instances. Additionally, the influence of the aforementioned parameters is investigated on the model performance.

Keywords: material ordering, project scheduling, quantity discount, space availability

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Authors: Roberta Martino, Viviana Ventre

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Every day we face choices whose consequences are deferred in time. These types of choices are the intertemporal choices and play an important role in the social, economic, and financial world. The Discounted Utility Model is the mathematical model of reference to calculate the utility of intertemporal prospects. The discount rate is the main element of the model as it describes how the individual perceives the indeterminacy of subsequent periods. Empirical evidence has shown a discrepancy between the behavior expected from the predictions of the model and the effective choices made from the decision makers. In particular, the term temporal inconsistency indicates those choices that do not remain optimal with the passage of time. This phenomenon has been described with hyperbolic models of the discount rate which, unlike the linear or exponential nature assumed by the discounted utility model, is not constant over time. This paper explores the problem of inconsistency by tracing the decision-making process through the concept of impatience. The degree of impatience and the degree of decrease of impatience are two parameters that allow to quantify the weight of emotional factors and cognitive limitations during the evaluation and selection of alternatives. In fact, although the theory assumes perfectly rational decision makers, behavioral finance and cognitive psychology have made it possible to understand that distortions in the decision-making process and emotional influence have an inevitable impact on the decision-making process. The degree to which impatience is diminished is the focus of the first part of the study. By comparing consistent and inconsistent preferences over time, it was possible to verify that some anomalies in the discounted utility model are a result of the combination of cognitive bias and emotional factors. In particular: the delay effect and the interval effect are compared through the concept of misperception of time; starting from psychological considerations, a criterion is proposed to identify the causes of the magnitude effect that considers the differences in outcomes rather than their ratio; the sign effect is analyzed by integrating in the evaluation of prospects with negative outcomes the psychological aspects of loss aversion provided by Prospect Theory. An experiment implemented confirms three findings: the greatest variation in the degree of decrease in impatience corresponds to shorter intervals close to the present; the greatest variation in the degree of impatience occurs for outcomes of lower magnitude; the variation in the degree of impatience is greatest for negative outcomes. The experimental phase was implemented with the construction of the hyperbolic factor through the administration of questionnaires constructed for each anomaly. This work formalizes the underlying causes of the discrepancy between the discounted utility model and the empirical evidence of preference reversal.

Keywords: decreasing impatience, discount utility model, hyperbolic discount, hyperbolic factor, impatience

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Authors: Grace Rachid, Mutasem El Fadel, Mahmoud Al Hindi, Ibrahim Jamali, Daniel Abdel Nour

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This study examines the feasibility of indirect solar desalination in oil producing countries in the Middle East and North Africa (MENA) region. It relies on value engineering (VE) and cost-benefit with sensitivity analyses to identify optimal coupling configurations of desalination and solar energy technologies. A comparative return on investment was assessed as a function of water costs for varied plant capacities (25,000 to 75,000 m3/day), project lifetimes (15 to 25 years), and discount rates (5 to 15%) taking into consideration water and energy subsidies, land cost as well as environmental externalities in the form of carbon credit related to greenhouse gas (GHG) emissions reduction. The results showed reverse osmosis (RO) coupled with photovoltaic technologies (PVs) as the most promising configuration, robust across different prices for Brent oil, discount rates, as well as different project lifetimes. Environmental externalities and subsidies analysis revealed that a 16% reduction in existing subsidy on water tariffs would ensure economic viability. Additionally, while land costs affect investment attractiveness, the viability of RO coupled with PV remains possible for a land purchase cost < $ 80/m2 or a lease rate < $1/m2/yr. Beyond those rates, further subsidy lifting is required.

Keywords: solar energy, desalination, value engineering, CBA, carbon credit, subsidies

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Authors: Roberta Martino, Viviana Ventre

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Empirical evidence has, over time, confirmed that the behavior of individuals is inconsistent with the descriptions provided by the Discounted Utility Model, an essential reference for calculating the utility of intertemporal prospects. The model assumes that individuals calculate the utility of intertemporal prospectuses by adding up the values of all outcomes obtained by multiplying the cardinal utility of the outcome by the discount function estimated at the time the outcome is received. The trend of the discount function is crucial for the preferences of the decision maker because it represents the perception of the future, and its trend causes temporally consistent or temporally inconsistent preferences. In particular, because different formulations of the discount function lead to various conclusions in predicting choice, the descriptive ability of models with a hyperbolic trend is greater than linear or exponential models. Suboptimal choices from any time point of view are the consequence of this mechanism, the psychological factors of which are encapsulated in the discount rate trend. In addition, analyzing the decision-making process from a psychological perspective, there is an equivalence between the selection of dominated prospects and a degree of impatience that decreases over time. The first part of the paper describes and investigates the anomalies of the discounted utility model by relating the cognitive distortions of the decision-maker to the emotional factors that are generated during the evaluation and selection of alternatives. Specifically, by studying the degree to which impatience decreases, it’s possible to quantify how the psychological and emotional mechanisms of the decision-maker result in a lack of decision persistence. In addition, this description presents inconsistency as the consequence of an inconsistent attitude towards time-delayed choices. The second part of the paper presents an experimental phase in which we show the relationship between inconsistency and impatience in different contexts. Analysis of the degree to which impatience decreases confirms the influence of the decision maker's emotional impulses for each anomaly in the utility model discussed in the first part of the paper. This work provides an application in the field of personalized behavioral finance. Indeed, the numerous behavioral diversities, evident even in the degrees of decrease in impatience in the experimental phase, support the idea that optimal strategies may not satisfy individuals in the same way. With the aim of homogenizing the categories of investors and to provide a personalized approach to advice, the results proven in the experimental phase are used in a complementary way with the information in the field of behavioral finance to implement the Analytical Hierarchy Process model in intertemporal choices, useful for strategic personalization. In the construction of the Analytic Hierarchy Process, the degree of decrease in impatience is understood as reflecting irrationality in decision-making and is therefore used for the construction of weights between anomalies and behavioral traits.

Keywords: analytic hierarchy process, behavioral finance, financial anomalies, impatience, time inconsistency

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Authors: Young Ik Suh, Tywan G. Martin

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Bundling strategy is a common marketing practice today. In the past decades, both academicians and practitioners have increasingly emphasized the strategic importance of bundling in today’s markets. The reason for increased interest in bundling strategy is that they normally believe that it can significantly increase profits on organization’s sales over time and it is convenient for the customer. However, little efforts has been made on ticket bundling and purchase considerations in hedonic and utilitarian options in sport consumer behavior context. Consumers often face choices between utilitarian and hedonic alternatives in decision making. When consumers purchase certain products, they are only interested in the functional dimensions, which are called utilitarian dimensions. On the other hand, others focus more on hedonic features such as fun, excitement, and pleasure. Thus, the current research examines how utilitarian and hedonic consumption can vary in typical ticket purchasing process. The purpose of this research is to understand the following two research themes: (1) the differential effect of discount framing on ticket bundling: utilitarian and hedonic options and (2) moderating effect of team identification on ticket bundling. In order to test the research hypotheses, an experimental study using a two-way ANOVA, 3 (team identification: low, medium, and high) X 2 (discount frame: ticket bundle sales with utilitarian product, and hedonic product), with mixed factorial design will be conducted to determine whether there is a statistical significance between purchasing intentions of two discount frames of ticket bundle sales within different team identification levels. To compare mean differences among the two different settings, we will create two conditions of ticket bundles: (1) offering a discount on a ticket ($5 off) if they would purchase it along with utilitarian product (e.g., iPhone8 case, t-shirt, cap), and (2) offering a discount on a ticket ($5 off) if they would purchase it along with hedonic product (e.g., pizza, drink, fans featured on big screen). The findings of the current ticket bundling study are expected to have many theoretical and practical contributions and implications by extending the research and literature pertaining to the relationship between team identification and sport consumer behavior. Specifically, this study can provide a reliable and valid framework to understanding the role of team identification as a moderator on behavioral intentions such as purchase intentions. From an academic perspective, the study will be the first known attempt to understand consumer reactions toward different discount frames related to ticket bundling. Even though the game ticket itself is the major commodity of sport event attendance and significantly related to teams’ revenue streams, most recent ticket pricing research has been done in terms of economic or cost-oriented pricing and not from a consumer psychological perspective. For sport practitioners, this study will also provide significant implications. The result will imply that sport marketers may need to develop two different ticketing promotions for loyal fan and non-loyal fans. Since loyal fans concern ticket price than tie-in products when they see ticket bundle sales, advertising campaign should be more focused on discounting ticket price.

Keywords: ticket bundling, hedonic, utilitarian, team identification

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Authors: Roberta Martino, Viviana Ventre

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The Discounted Utility Model is the essential reference for calculating the utility of intertemporal prospects. According to this model, the value assigned to an outcome is the smaller the greater the distance between the moment in which the choice is made and the instant in which the outcome is perceived. This diminution determines the intertemporal preferences of the individual, the psychological significance of which is encapsulated in the discount rate. The classic model provides a discount rate of linear or exponential nature, necessary for temporally consistent preferences. Empirical evidence, however, has proven that individuals apply discount rates with a hyperbolic nature generating the phenomenon of intemporal inconsistency. What this means is that individuals have difficulty managing their money and future. Behavioral finance, which analyzes the investor's attitude through cognitive psychology, has made it possible to understand that beyond individual financial competence, there are factors that condition choices because they alter the decision-making process: behavioral bias. Since such cognitive biases are inevitable, to improve the quality of choices, research has focused on a personalized approach to strategies that combines behavioral finance with personality theory. From the considerations, it emerges the need to find a procedure to construct the personalized strategies that consider the personal characteristics of the client, such as age or gender, and his personality. The work is developed in three parts. The first part discusses and investigates the weight of the degree of impatience and impatience decrease in the anomalies of the discounted utility model. Specifically, the degree of decrease in impatience quantifies the impact that emotional factors generated by haste and financial market agitation have on decision making. The second part considers the relationship between decision making and personality theory. Specifically, four behavioral categories associated with four categories of behavioral investors are considered. This association allows us to interpret intertemporal choice as a combination of bias and temperament. The third part of the paper presents a method for constructing personalized strategies using Analytic Hierarchy Process. Briefly: the first level of the analytic hierarchy process considers the goal of the strategic plan; the second level considers the four temperaments; the third level compares the temperaments with the anomalies of the discounted utility model; and the fourth level contains the different possible alternatives to be selected. The weights of the hierarchy between level 2 and level 3 are constructed considering the degrees of decrease in impatience derived for each temperament with an experimental phase. The results obtained confirm the relationship between temperaments and anomalies through the degree of decrease in impatience and highlight that the actual impact of emotions in decision making. Moreover, it proposes an original and useful way to improve financial advice. Inclusion of additional levels in the Analytic Hierarchy Process can further improve strategic personalization.

Keywords: analytic hierarchy process, behavioral finance anomalies, intertemporal choice, personalized strategies

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Authors: Ching-Feng Chen

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The floating photovoltaic (FPV) system highlights economic benefits and energy performance to carbon dioxide (CO₂) discharges. Due to land resource scarcity and many negligent water territories, such as reservoirs, dams, and lakes in Japan and Taiwan, both countries are actively developing FPV and responding to the pricing of the emissions trading systems (ETS). This paper performs a case study through a synthesis approach to compare the economic indicators between the FPVs of Taiwan’s Agongdian Reservoir and Japan’s Yamakura Dam. The research results show that the metrics of the system capacity, installation costs, bank interest rates, and ETS and Electricity Bills affect FPV operating gains. In the post-Feed-In-Tariff (FIT) phase, investing in FPV in Japan is more profitable than in Taiwan. The former’s positive net present value (NPV), eminent internal rate of return (IRR) (11.6%), and benefit-cost ratio (BCR) above 1 (2.0) at the discount rate of 10% indicate that investing the FPV in Japan is more favorable than in Taiwan. In addition, the breakeven point is modest (about 61.3%.). The presented methodology in the study helps investors evaluate schemes’ pros and cons and determine whether a decision is beneficial while funding PV or FPV projects.

Keywords: carbon border adjustment mechanism, floating photovoltaic, emissions trading systems, net present value, internal rate of return, benefit-cost ratio

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Authors: Armando Cartenì, Ilaria Henke

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Recently, the Italian government has approved a new law for public contracts and has been laying the groundwork for restarting a planning phase. The government has adopted the indications given by the European Commission regarding the estimation of the external costs within the Cost-Benefit Analysis, and has been approved the ‘Guidelines for assessment of Investment Projects’. In compliance with the new Italian law, the aim of this research was to perform a feasibility study applying quantitative methods regarding the revamping of an Italian tourist railway line. A Cost-Benefit Analysis was performed starting from the quantification of the passengers’ demand potentially interested in using the revamped rail services. The benefits due to the external costs reduction were also estimated (quantified) in terms of variations (with respect to the not project scenario): climate change, air pollution, noises, congestion, and accidents. Estimations results have been proposed in terms of the Measure of Effectiveness underlying a positive Net Present Value equal to about 27 million of Euros, an Internal Rate of Return much greater the discount rate, a benefit/cost ratio equal to 2 and a PayBack Period of 15 years.

Keywords: cost-benefit analysis, evaluation analysis, demand management, external cost, transport planning, quality

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Authors: A. Hany A. Khater, G. M. Mostafa, M. R. Badawy

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The techno-economic analysis of the nuclear desalination is a very important tool that enables studying of the mutual effects between the nuclear power plant and the coupled desalination plant under different operating conditions, and hence investigating the feasibility of safe and economical production of potable water. For this purpose, a comprehensive model for both technical and economic performance evaluation of the nuclear desalination has been prepared. The developed model has the capability to be used in performing a parametric study for the performance measuring parameters of the nuclear desalination system. Also a sensitivity analysis of varying important factors such as interest/discount rate, power plant availability, fossil fuel prices, purchased electricity price, nuclear fuel cost, and specific base cost for both power and water plant has been conducted.

Keywords: uclear desalination, PWR, MED, MED-TVC, MSF, RO

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Authors: Roberta Martino, Viviana Ventre

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Intertemporal choices are choices under conditions of uncertainty in which the consequences are distributed over time. The Discounted Utility Model is the essential reference for describing the individual in the context of intertemporal choice. The model is based on the idea that the individual selects the alternative with the highest utility, which is calculated by multiplying the cardinal utility of the outcome, as if the reception were instantaneous, by the discount function that determines a decrease in the utility value according to how the actual reception of the outcome is far away from the moment the choice is made. Initially, the discount function was assumed to have an exponential trend, whose decrease over time is constant, in line with a profile of a rational investor described by classical economics. Instead, empirical evidence called for the formulation of alternative, hyperbolic models that better represented the actual actions of the investor. Attitudes that do not comply with the principles of classical rationality are termed anomalous, i.e., difficult to rationalize and describe through normative models. The development of behavioral finance, which describes investor behavior through cognitive psychology, has shown that deviations from rationality are due to the limited rationality condition of human beings. What this means is that when a choice is made in a very difficult and information-rich environment, the brain does a compromise job between the cognitive effort required and the selection of an alternative. Moreover, the evaluation and selection phase of the alternative, the collection and processing of information, are dynamics conditioned by systematic distortions of the decision-making process that are the behavioral biases involving the individual's emotional and cognitive system. In this paper we present an original decomposition of the discount function to investigate the psychological principles of hyperbolic discounting. It is possible to decompose the curve into two components: the first component is responsible for the smaller decrease in the outcome as time increases and is related to the individual's impatience; the second component relates to the change in the direction of the tangent vector to the curve and indicates how much the individual perceives the indeterminacy of the future indicating his or her aversion to uncertainty. This decomposition allows interesting conclusions to be drawn with respect to the concept of impatience and the emotional drives involved in decision-making. The contribution that neuroscience can make to decision theory and inter-temporal choice theory is vast as it would allow the description of the decision-making process as the relationship between the individual's emotional and cognitive factors. Neurofinance is a discipline that uses a multidisciplinary approach to investigate how the brain influences decision-making. Indeed, considering that the decision-making process is linked to the activity of the prefrontal cortex and amygdala, neurofinance can help determine the extent to which abnormal attitudes respect the principles of rationality.

Keywords: impatience, intertemporal choice, neurofinance, rationality, uncertainty

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Authors: Inten Meutia, Emylia Yuniarti

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The objective of this study is to analyze the effects of interest rate, the rate of return of Islamic banks on the amount of mudarabah deposits in Islamic banks. In analyzing the effect of rate of return in the Islamic banks and interest rate risk in the conventional banks, the 1-month Islamic deposit rate of return and 1 month fixed deposit interest rate of a total Islamic deposit are considered. Using data covering the period from January 2010 to Sepember 2013, the study applies the regression analysis to analyze the effect between variable and independence t-test to analyze the mean difference between rate of return and rate of interest. Regression analysis shows that rate of return have significantly negative influence on mudarabah deposits, while interest rate have negative influence but not significant. The result of independent t test shows that the interest rate is not different from the rate of return in Islamic Bank. It supports the hyphotesis that rate of return in Islamic banking mimic rate of interest in conventional bank. The results of the study have important implications on the risk management practices of the Islamic banks in Indonesia.

Keywords: conventional bank, interest rate, Islamic bank, rate of return

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Authors: David Calderon Villegas, Thomas Kaltizky

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Run-of-river (RoR) hydropower projects represent a viable, clean, and cost-effective alternative to dam-based plants and provide decentralized power production. However, RoR schemes cost-effectiveness depends on the proper selection of site and design flow, which is a challenging task because it requires multivariate analysis. In this respect, this study presents the development of an investment decision support tool for assessing the optimal size of an RoR scheme considering the technical, environmental, and cost constraints. The net present value (NPV) from a project perspective is used as an objective function for supporting the investment decision. The tool has been tested by applying it to an actual RoR project recently proposed in Colombia. The obtained results show that the optimum point in financial terms does not match the flow that maximizes energy generation from exploiting the river's available flow. For the case study, the flow that maximizes energy corresponds to a value of 5.1 m3/s. In comparison, an amount of 2.1 m3/s maximizes the investors NPV. Finally, a sensitivity analysis is performed to determine the NPV as a function of the debt rate changes and the electricity prices and the CapEx. Even for the worst-case scenario, the optimal size represents a positive business case with an NPV of 2.2 USD million and an IRR 1.5 times higher than the discount rate.

Keywords: small hydropower, renewable energy, RoR schemes, optimal sizing, objective function

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Authors: Tri Wijayanti Septiarini, Agus Maman Abadi, Muhammad Rifki Taufik

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The exchange rate of IDR/USD can be the indicator to analysis Indonesian economy. The exchange rate as a important factor because it has big effect in Indonesian economy overall. So, it needs the analysis data of exchange rate. There is decomposition data of exchange rate of IDR/USD to be frequency and time. It can help the government to monitor the Indonesian economy. This method is very effective to identify the case, have high accurate result and have simple structure. In this paper, data of exchange rate that used is weekly data from December 17, 2010 until November 11, 2014.

Keywords: the exchange rate, fuzzy mamdani, discrete wavelet transforms, fuzzy wavelet

Procedia PDF Downloads 532

Authors: Ghada Abo-Zaid

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Introduction: Oil is one of the most income source in Bahrain. Low oil price influence on the economy growth and the investment rate in Bahrain. For example, the economic growth was 3.7% in 2012, and it reduced to 2.9% in 2015. Investment rate was 9.8% in 2012, and it is reduced to be 5.9% and -12.1% in 2014 and 2015, respectively. The inflation rate is increased to the peak point in 2013 with 3.3 %. Objectives: The objectives here are to build statistical models to examine the effect of the interest rate inflation rate on the growth economy in Bahrain from 2000 to 2018. Methods: This study based on 18 years, and the multiple regression model is used for the analysis. All of the missing data are omitted from the analysis. Results: Regression model is used to examine the association between the Growth national product (GNP), the inflation rate, and real interest rate. We found that (i) Increase the real interest rate decrease the GNP. (ii) Increase the inflation rate does not effect on the growth economy in Bahrain since the average of the inflation rate was almost 2%, and this is considered as a low percentage. Conclusion: There is a positive impact of the real interest rate on the GNP in Bahrain. While the inflation rate does not show any negative influence on the GNP as the inflation rate was not large enough to effect negatively on the economy growth rate in Bahrain.

Keywords: growth national product, egypt, regression model, interest rate

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Authors: Amirreza Attarzadeh

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This paper aims to investigate the relationship between economic variables, e.g., inflation rate, interest rate, trade openness and the growth rate of GDP, with domestic investment. The present study also draws on conceptual economy related theories to verify the negative effect of interest rates on domestic investment. However, trade openness and growth rate had a positive correlation, and the inflation rate may have a positive or negative impact on domestic investment.

Keywords: inflation rate, growth rate of GDP, interest rate and trade openness, domestic investment

Procedia PDF Downloads 376

Authors: Saeidreza Radpour, Md. Alam Mondal, Amit Kumar

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Market penetration of high energy efficiency technologies has key impacts on energy consumption and GHG mitigation. Also, it will be useful to manage the policies formulated by public or private organizations to achieve energy or environmental targets. Energy intensity in residential sector of Alberta was 148.8 GJ per household in 2012 which is 39% more than the average of Canada 106.6 GJ, it was the highest amount among the provinces on per household energy consumption. Energy intensity by appliances of Alberta was 15.3 GJ per household in 2012 which is 14% higher than average value of other provinces and territories in energy demand intensity by appliances in Canada. In this research, a framework has been developed to analyze the market penetration and market share of high energy efficiency technologies in residential sector. The overall methodology was based on development of data-intensive models’ estimation of the market penetration of the appliances in the residential sector over a time period. The developed models were a function of a number of macroeconomic and technical parameters. Developed mathematical equations were developed based on twenty-two years of historical data (1990-2011). The models were analyzed through a series of statistical tests. The market shares of high efficiency appliances were estimated based on the related variables such as capital and operating costs, discount rate, appliance’s life time, annual interest rate, incentives and maximum achievable efficiency in the period of 2015 to 2050. Results show that the market penetration of refrigerators is higher than that of other appliances. The stocks of refrigerators per household are anticipated to increase from 1.28 in 2012 to 1.314 and 1.328 in 2030 and 2050, respectively. Modelling results show that the market penetration rate of stand-alone freezers will decrease between 2012 and 2050. Freezer stock per household will decline from 0.634 in 2012 to 0.556 and 0.515 in 2030 and 2050, respectively. The stock of dishwashers per household is expected to increase from 0.761 in 2012 to 0.865 and 0.960 in 2030 and 2050, respectively. The increase in the market penetration rate of clothes washers and clothes dryers is nearly parallel. The stock of clothes washers and clothes dryers per household is expected to rise from 0.893 and 0.979 in 2012 to 0.960 and 1.0 in 2050, respectively. This proposed presentation will include detailed discussion on the modelling methodology and results.

Keywords: appliances efficiency improvement, energy star, market penetration, residential sector

Procedia PDF Downloads 255

Authors: Ahmed Arkoazi, Hussein Znad, Ranjeet Utikar

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The synergistic impact and optimization of gas flow rate, concentration of CO₂, and light intensity on CO₂ biofixation rate were investigated using wastewater as a medium to cultivate Chlorella vulgaris under different conditions (gas flow rate 1-8 L/min), CO₂ concentration (0.03-7%), and light intensity (150-400 µmol/m².s)). Response Surface Methodology and Box-Behnken experimental Design were applied to find optimum values for gas flow rate, CO₂ concentration, and light intensity. The optimum values of the three independent variables (gas flow rate, concentration of CO₂, and light intensity) and desirability were 7.5 L/min, 3.5%, and 400 µmol/m².s, and 0.904, respectively. The highest amount of biomass produced and CO₂ biofixation rate at optimum conditions were 5.7 g/L, 1.23 gL^-1d^-1, respectively. The synergistic effect between gas flow rate and concentration of CO₂, and between gas flow rate and light intensity was significant on the three responses, while the effect between CO₂ concentration and light intensity was less significant on CO₂ biofixation rate. The results of this study could be highly helpful when using microalgae for CO₂ biofixation in wastewater treatment.

Keywords: bubble column reactor, gas holdup, hydrodynamics, sparger

Procedia PDF Downloads 109

Authors: R. Henry, H. Andriamboavonjy, J. B. Paulin, S. Drahy, R. Gourichon

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During past decade, Chinese monetary policy has been to maintain stability of exchange rate CNY/USD by creating parity between the two currencies. This policy, against market equilibrium, impacts the exchange rate in having low Yuan currency, and keeping attractiveness of Chinese industries. Using macroeconomic and statistic approach, the impact of such policy onto CNY/USD exchange rate is quantitatively determined. It is also pointed out how Chinese banks respect Basel III ratios, in particular the foreign exchange ratio. The main analysis is focusing on how Chinese banks will respect these ratios in the future.

Keywords: macroeconomics models, yuan floating exchange rate, basel iii, china banking system

Procedia PDF Downloads 535

Authors: Kemi Olalekan Oduntan

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This paper was carried out in order to empirical, and descriptively analysis how interest rate and foreign exchange rate liberalization influence investment decision in Nigeria. The study spanned through the period of 1985 – 2014, secondary data were restricted to relevant variables such as investment (Proxy by Gross Fixed Capital Formation) saving rate, interest rate and foreign exchange rate. Theories and empirical literature from various scholars were reviews in the paper. Ordinary Least Square regression method was used for the analysis of data collection. The result of the regression was critically interpreted and discussed. It was discovered for empirical finding that tax investment decision in Nigeria is highly at sensitive rate. Hence, all the alternative hypotheses were accepted while the respective null hypotheses were rejected as a result of interest rate and foreign exchange has significant effect on investment in Nigeria. Therefore, impact of interest rate and foreign exchange rate on the state of investment in the economy cannot be over emphasized.

Keywords: interest rate, foreign exchange liberalization, investment decision, economic growth

Procedia PDF Downloads 336

Authors: Dongjoo Kim, Chang-Sik Son, Won-Seok Kang

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Adequate sleep affects various parts of one’s overall physical and mental life. As one of the methods in determining the appropriate amount of sleep, this research presents a heart rate based sleep quality index. In order to evaluate sleep quality using the heart rate, sleep data from 280 subjects taken over one month are used. Their sleep data are categorized by a three-part heart rate range. After categorizing, some features are extracted, and the statistical significances are verified for these features. The results show that some features of this sleep quality index model have statistical significance. Thus, this heart rate based sleep quality index may be a useful discriminator of sleep.

Keywords: sleep, sleep quality, heart rate, statistical analysis

Procedia PDF Downloads 306