Showing papers on "Embedded value published in 1993"
TL;DR: In this article, the authors discuss the limitations of conventional NPV formulas, the need for a generalized net present value formula, the use of this generalized formula to evaluate financing as well as investment opportunities and the linkage between NPV formula and rate of return criteria.
Abstract: Conventional NPV formulas suggest that a project's net present value is simply the sum of the present values of its net cash flows. An alternative view sees net present value as the difference between the initial wealth and the present value of the terminal wealth attributable to the project. This “incremental wealth” view requires a generalized formula which provides explicitly for the opportunity costs associated with interim cash flows. This paper discusses the limitations of conventional NPV formulas, the need for a generalized net present value formula, the use of this generalized formula to evaluate financing as well as investment opportunities and the linkage between net present value formulas and rate of return criteria.
35 citations
Journal Article•
TL;DR: In this article, the authors define value as what the customer got divided by what it cost the customer (GOT/COST) to buy the product. And they argue that to be competitive, organizations must provide the minimum acceptabl..
Abstract: Ultimately, there is just one business issue: delivering value to customers. Value can be defined as what the customer got divided by what it cost the customer (GOT/COST). To be competitive, organizations must provide the minimum acceptabl..
3 citations
Posted Content•
TL;DR: In this paper, the authors consider a monopoly insurance company that is unable to estimate the value of covered assets at the time of underwriting, and derive the monopoly equilibrium when this clause is imposed by the State using an argument of fairness among policyholders.
Abstract: We consider a monopoly insurance company that is unable to estimate the value of covered assets at the time of underwriting. Only the distribution of the severity of losses is known. Also, an ex-post appraisal of the value of the property can be performed in case of accident. As in most property insurance lines, the premium paid relies on the value of the asset announced by the owner. The coinsurance clause stipulates that the indemnity paid by the insurer equals the actual loss multiplied by the ratio of the amount of insurance carried over the value of the insured property. We show that this clause does not allow the insurer to extract a maximum surplus from trade in the sense that policyholders would deliberately underestimate the value of their asset under that clause. We derive the monopoly equilibrium when this clause is imposed by the State using an argument of fairness among policyholders. We show that owners with a low property value will be partially insured at equilibrium, whereas owners with a larger value will be fully covered.