Browsing by Subject "Valuation"
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Item Decision impact of stochastic price models in the petroleum industry(2011-08) Hammond, Robert Kincaid; Bickel, J. Eric; Dyer, James S.; Smith, James E.Stochastic price models have proven material to decision making in the oil industry when accurate valuations are important, but little consideration is given to their impact on decisions based on relative project rankings. Traditional industry economic analysis methods do not usually consider uncertainty in oil price, although the real options literature has shown that this practice underestimates the value of projects that have flexibility. Monetary budget constraints are not always the limiting constraints in decision making; there may be other constraints that limit the number of projects a company can undertake. We consider building a portfolio of upstream petroleum development projects to determine the relevance of stochastic price models to a decision for which accurate valuations may not be important. The results provide guidelines to determine when a stochastic price model should be used in economic analysis of petroleum projects.Item Modeling Risks in Infrastructure Asset Management(2012-10-19) Seyedolshohadaie, Seyed RezaThe goal of this dissertation research is to model risk in delivery, operation and maintenance phases of infrastructure asset management. More specifically, the two main objectives of this research are to quantify and measure financial risk in privatizing and operational risks in maintenance and rehabilitation of infrastructure facilities. To this end, a valuation procedure for valuing large-scale risky projects is proposed. This valuation approach is based on mean-risk portfolio optimization in which a risk-averse decision-maker seeks to maximize the expected return subject to downside risk. We show that, in complete markets, the value obtained from this approach is equal to the value obtained from the standard option pricing approach. Furthermore, we introduce Coherent Valuation Procedure (CVP) for valuing risky projects in partially complete markets. This approach leads to a lower degree of subjectivity as it only requires one parameter to incorporate user's risk preferences. Compared to the traditional discounted cash flow analysis, CVP displays a reasonable degree of sensitivity to the discount rate since only the risk-free rate is used to discount future cash flows. The application of this procedure on valuing a transportation public-private partnership is presented. %and demonstrate that the breakeven buying price of a risky project is equal to the value obtained from this valuation procedure. Secondly, a risk-based framework for prescribing optimal risk-based maintenance and rehabilitation (M&R) policies for transportation infrastructure is presented. These policies guarantee a certain performance level across the network under a predefined level of risk. The long-term model is formulated in the Markov Decision Process framework with risk-averse actions and transitional probabilities describing the uncertainty in the deterioration process. Conditional Value at Risk (CVaR) is used as the measure of risk. The steady-state risk-averse M&R policies are modeled assuming no budget restriction. To address the short-term resource allocation problem, two linear programming models are presented to generate network-level polices with different objectives. In the first model, decision-maker minimizes the total risk across the network, and in the second model, the highest risk to the network performance is minimized.Item Overpriced mergers and acquisitions in the chemical industry(2009-12) Momin, Farid L.; Lewis, Kyle, 1961-; Duvic, Robert Conrad, 1947-Mergers and acquisitions within the chemical industry is a common practice to increase market presence and customer base. Common justifications for M&A include synergy, business growth and competitive advantages, and management reasoning. Synergies are benefits a combined firm is able to receive through cost reductions, market expansion, and efficiencies in processes. As a result, firms are able to grow and position themselves competitively. To prevent an overpriced acquisition, numerous valuation techniques exist. The discount cash flow examines the value of a firm based on future cash flow. The market multiple compares target firms to similar firms in the industry. Lastly, the asset valuation determines the value of a firm based on the liquidation of the firm. To maximize the return on an acquisition, proper due diligence should be conducted based on the needs and goals of the purchaser, and the value added by the target firm. The premium paid for an acquisition should be based on the valued added through the synergies identified. Current business cycles and future outlook should also factor into the pricing of the acquisition. Having a thorough analysis of a target firm can help the acquirer to clearly understand what is being purchased and hence, determine an appropriate price for the acquisition.Item Prospective effort and choice(2014-12) Malecek, Nicholas John; Poldrack, Russell A.; Huk, Alexander C.; Beer, Jennifer; Maddox, Todd; Lewis-Peacock, JarrodWe constantly face the challenge of selecting among actions in pursuit of our goals. Behavioral theories suggest the ubiquity of these choices necessitate a valuation process that integrates expected costs and outcomes. Increased sensitivity to costs in value-based choices, such as reduced willingness to tolerate risk, wait or work for rewards, features prominently in the symptomatology of mental illness. Contrary to classical theories of choice that do not distinguish among cost type, the recent unification of experimental economics, psychology and neuroscience describes the influence of specific costs upon behavioral and neural correlates of subjective value. Despite substantial progress in the understanding of the basis of subjective valuation under delay and risk, the specific influence of effort, the energetic cost of an action, remains largely unknown. Limited existing accounts hypothesize that cost sensitivity during subjective valuation results from separable neural systems related to risk, delay and effort. This dissertation evaluates evidence for distinct neural representation of effort and presents a set of experiments designed to refine normative accounts of effort-based choice. First, I review the neural basis of economic choice under risk and delay. Second, I review limited accounts economic choice under effort. I describe a novel prospective effort task designed and validated to examine effort-based valuation and address potential confounds present in previous studies. In the first experiment, I report novel evidence for discounting of neural activity related to value by prospective effort and conjoint sensitivity to effort costs and expected outcomes in brain regions related to selection and generation of actions. In a second experiment, I examined the influence of prospective effort costs upon delay discounting preferences. This experiment did not find modulation of individual preferences by prospective effort costs. Finally, I discuss our results in the context of existing accounts and potential extensions of the prospective effort paradigm. Overall, I show that prospective effort imposes a specific cost, reflected in behavioral and neural correlates of value, and presents a novel approach to further the understanding of motivated behavior.Item The valuation of soft assets and soft liabilities of financial managers of educational institutions.(Texas Tech University, 1975-12) Kagle, Arthur RennNot availableItem Valuation of an advanced combined cycle power plant and its cost of new entry (CONE) into the ERCOT market(2014-08) Zaborowski, Jeremy Ronald; Webber, Michael E., 1971-The Texas ERCOT market is one of the most open, deregulated electricity markets in the world. This open market brought electricity costs down for Texas residents and businesses, creating a much more competitive economic climate. However, these low prices currently generate insufficient revenue for generators to finance construction of new or replacement generation assets. In the instance of combined cycle advanced natural gas, the Independent Market Monitor 2012 annual report estimated that a plant needed to generate 2.5 times as much as revenue it did in 2012 to incent new generation. This author argues that while the gap is still significant, the continuous changes to the ERCOT market since its inception make an historical examination like that used by the IMM less accurate. New market rules such as price caps or changes in fuel markets through new technologies like hydraulic fracturing create a very different valuation gap than a model based on historical activity alone. This analysis attempts to get a more accurate approximation of the gap through the use of publicly traded futures contracts for natural gas and electricity. Electricity futures reflect market expectations of revenue based on current and future market rules. Gas futures reflect price expectations in light of market changes like fracturing, potential LNG exports, and other changes. Financial positions can be maintained in both markets to give a fixed rate of return. Using this method, one can create a very conservative valuation model that still more accurately reflects market sentiment. This thesis starts with a brief history of ERCOT deregulation from the early 2000s to present in order to clarify for the reader the changes that have taken place in the market. It then demonstrates the futures-valuation model using an advanced combined cycle power plant as an example.