Residual income and value creation: An investigation into the lost-capital paradigm

This paper presents a new way of measuring residual income, originally introduced by Magni (2000a,b,c, 2001a,b, 2003). Contrary to the standard residual income, the capital charge is equal to the capital lost by investors multiplied by the cost of capital. The lost capital may be viewed as (a) the foregone capital, (b) the capital implicitly infused into the business, (c) the outstanding capital of a shadow project, (d) the claimholders’ credit. Relations of the lost capital with book values and market values are studied, as well as relations of the lost capital residual income with the classical standard paradigm; many appealing properties are derived, among which an aggregation property. Different concepts and results, provided by different authors in such different fields as economic theory, management accounting and corporate finance, are considered: O’Hanlon and Peasnell’s (2002) unrecovered capital and Excess Value Created; Ohlson’s (2005) Abnormal Earnings Growth; O’Byrne’s (1997) EVA improvement; Miller and Modigliani’s (1961) investment opportunities approach to valuation; Young and O’Byrne’s (2001) Adjusted EVA; Keynes’s (1936) user cost; Drukarczyk and Schueler’s (2000) Net Economic Income; Fernández’s (2002) Created Shareholder Value; Anthony’s (1975) profit. They are all conveniently reinterpreted within the theoretical domain of the lost-capital paradigm and conjoined in a unified view. The results found make this new theoretical approach a good candidate for firm valuation, capital budgeting decision-making, managerial incentives and control.     

On a New Fluctuation–Dissipation Theorem for Degenerate Stationary Flows

The theory of KM₂O-Langevin equations for stochastic processes (or more generally, flows in inner product spaces) have been developed in view of applications to time series analysis (e.g., Okabe and Nakano, 1991; Okabe, 1999, 2000; Okabe and Matsuura, 2000). In Klimek et al. (2002) and Matsuura and Okabe (2001, 2003), we have investigated degenerate flows, which is important in the analysis of time series obtained from deterministic dynamical systems. As a continuation, we shall in this paper derive an efficient algorithm by which the minimum norm coefficients of KM₂O-Langevin equations are explicitly obtained in degenerate cases. The obtained results have close relations to the calculations of conditional expectations such as nonlinear predictors of stochastic processes (Matsuura and Okabe, 2001). The method has also potential applications to financial mathematics.     

Making decisions in the absence of clear facts

Bennis and O’Toole [Bennis, W.G., O’Toole, J., 2005. How business schools lost their way. Harvard Business Review 83, 96–104] have recently argued that decision makers need guidance in ‘making decisions in the absence of clear facts’. As such, decision makers must be able to resourcefully use whatever limited information is available and advantageously portray its implications. Based on recently published theory which directly addresses this requirement, this paper demonstrates, through a practical example, how decision makers can make systemic decisions in situations characterized by extremely limited information and, furthermore, what form such decisions can take. Evidence is provided, therefore, that operational research can effectively address what appears to be a gap in management training.     

Softness of MALL proof-structures and a correctness criterion with Mix

We show that every MALL proof-structure [9] satisfies the property of softness, originally a categorical notion introduced by Joyal. Furthermore, we show that the notion of hereditary softness precisely captures Girards algebraic restriction of the technical condition on proof-structures. Relying on this characterization, we prove a MALL+Mix sequentialization theorem by a proof-theoretical method, using Girards notion of jump. Our MALL+Mix correctness criterion subsumes the Danos/Fleury-Retoré criterion [6] for MLL+Mix.This work was supported by Grant-in-Aid for Young Scientists of Ministry of Education, Science and Culture of Japan.Mathematics Subject Classification (2000):03F52, 03F07, 03F03Revised version: 9 August 2003     

The prolific backbone for supercritical superprocesses

We develop an idea of Evans and O’Connell (1994) [13], Engländer and Pinsky (1999) [10] and Duquesne and Winkel (2007) [4] by giving a pathwise construction of the so-called ‘backbone’ decomposition for supercritical superprocesses. Our results also complement a related result for critical (1+β)-superprocesses given in Etheridge and Williams (2003) [11]. Our approach relies heavily on the use of Dynkin-Kuznetsov N-measures.     

On the ranks of O’N and Ly

Let G be a finite group and X a conjugacy class of G. We denote rank(G:X) to be the minimum number of elements of X generating G. In the present article, we determine the ranks for two sporadic simple groups, namely the O’Nan sporadic simple group O’N and the Lyons sporadic simple group, Ly. Computations were carried with the aid of the computer algebra system GAP [The GAP Group, GAP—Groups, Algorithms and Programming, Version 4.3, Aachen, St Andrews, 2003, 〈http://www.gap-system.org〉].     

Correct or incorrect application of CAPM? Correct or incorrect decisions with CAPM?

This paper focuses on inconsistencies arising from the use of NPV and CAPM for capital budgeting. It shows that: (i) CAPM capital budgeting decision-making based on disequilibrium NPV is deductively inferred by the capital asset pricing model, (ii) the use of the disequilibrium NPV is widespread in finance both as a decision rule and as a valuation tool, (iii) the disequilibrium NPV does not guarantee additivity nor consistency with arbitrage pricing, so that it is unreliable for valuation, (iv) Magni’s [Magni, C.A., 2002. Investment decisions in the theory of finance: Some antinomies and inconsistencies. European Journal of Operational Research 137, 206–217; Magni, C.A., 2007a. Project valuation and investment decisions: CAPM versus arbitrage. Applied Financial Economics Letters 3 (2), 137–140] criticism of the NPV criterion refers to the disequilibrium NPV, and De Reyck’s [De Reyck, B., 2005. On investment decisions in the theory of finance: Some antinomies and inconsistencies. European of Operational Research 161, 499–504] project valuation method, on the basis of which Magni’s criticism to NPV is objected, leaves decision makers open to arbitrage losses and incorrect decisions.     

Multiple positive solutions for a class of integral inclusions

This paper deals with sufficient conditions for the existence of at least two positive solutions for a class of integral inclusions arising in the traffic theory. To show our main results, we apply a norm-type expansion and compression fixed point theorem for multivalued map due to Agarwal and O’Regan [A note on the existence of multiple fixed points for multivalued maps with applications, J. Differential Equation 160 (2000) 389–403].     

Hechler’s theorem for the null ideal

We prove the following theorem: For a partially ordered set Q such that every countable subset of Q has a strict upper bound, there is a forcing notion satisfying the countable chain condition such that, in the forcing extension, there is a basis of the null ideal of the real line which is order-isomorphic to Q with respect to set-inclusion. This is a variation of Hechlers classical result in the theory of forcing. The corresponding theorem for the meager ideal was established by Bartoszyski and Kada.Research supported by NSERC. The first author thanks F.D. Tall and the Department of Mathematics at the University of Toronto for their hospitality during the academic year 2003/2004 when the present paper was completed.The second author was supported by Grant-in-Aid for Young Scientists (B) 14740058, MEXT.Mathematics Subject Classification (2000): 03E35, 03E17Revised version: 16 February 2004     

Decision model and analysis for investment interest expense deduction and allocation

Investment income tax planning requires informed, strategic choices. One must determine the amount of qualified dividends and net long-term capital gain to be included in investment income (against which investment interest expense can be deducted). This choice also determines the residual qualified dividends and net long-term capital gain which enjoy a reduced tax rate. Another important decision is whether all or some of this interest expense should be deducted in the current year or carried forward. This paper puts forward a new approach to formulate these questions as a generalized resource allocation problem which permits analysis of the interdependence between, and the tax consequences of, the above decisions. The commonly used approach – deducting investment interest expense sooner rather than later – we consider myopic since the benefit of deferring some of the deduction is not leveraged. Presented here is a tax planning guideline (a necessary and sufficient condition for optimality) to realize a more forward-looking strategy. We also show that, for certain income structures, the tax savings by deducting a one-dollar investment interest expense may be more than the tax rate on the dollar of investment income that is offset.     

Chisini means and rational decision making: equivalence of investment criteria

A plethora of tools are used for investment decisions and performance measurement, including net present value, internal rate of return, profitability index, modified internal rate of return, average accounting rate of return. All these and other known metrics are generally considered non-equivalent and some of them are regarded as unreliable or even naïve. Building upon Magni (Eng Econ 55(2):150–180, 2010a, Eng Econ 58(2):73–111, 2013)’s average internal rate of return, we show that the notion of Chisini mean enables these tools to be used as rational decision criteria. Specifically, we focus on 11 metrics and show that, if properly used, they all provide equivalent accept–reject decisions and equivalent project rankings. Therefore, the intuitive notion of mean is the founding basis of investment decision criteria.     

The Bando-Calabi-Futaki character and its lifting to a group character

 The Bando-Calabi-Futaki character of a compact K?hler manifold is an obstruction to the existence of K?hler metrics with constant scalar curvature, which is a generalization of the Futaki character of a Fano manifold. In this paper, we shall establish an interpretation of the Bando-Calabi-Futaki character as a secondary characteristic class. By using this interpretation, we shall also prove that the Bando-Calabi-Futaki character can be lifted to a group character. Received: 26 October 2000 / Revised version: 25 October 2001 / Published online: 16 October 2002 RID="★" ID="★" Partly supported by the Grant-in-Aid for Encouragement of Young Scientists (No. 09740047), The Ministry of Education, Science, Sports and Culture, Japan Mathematics Subject Classification (2000): 32Q20, 32Q15, 32M05, 57R30     

Stability of Strongly Gauduchon Manifolds Under Modifications

In our previous works on deformation limits of projective and Moishezon manifolds, we introduced and made crucial use of the notion of strongly Gauduchon metrics as a reinforcement of the earlier notion of Gauduchon metrics. Using direct and inverse images of closed positive currents of type (1,1) and regularization, we now show that compact complex manifolds carrying strongly Gauduchon metrics are stable under modifications. This stability property, known to fail for compact Kähler manifolds, mirrors the modification stability of balanced manifolds proved by Alessandrini and Bassanelli.     

Monge extensions of cooperation and communication structures

Cooperation structures without any a priori assumptions on the combinatorial structure of feasible coalitions are studied and a general theory for marginal values, cores and convexity is established. The theory is based on the notion of a Monge extension of a general characteristic function, which is equivalent to the Lovász extension in the special situation of a classical cooperative game. It is shown that convexity of a cooperation structure is tantamount to the equality of the associated core and Weber set. Extending Myerson’s graph model for game theoretic communication, general communication structures are introduced and it is shown that a notion of supermodularity exists for this class that characterizes convexity and properly extends Shapley’s convexity model for classical cooperative games.     

Réflexion retardée pour des paquets d'ondes dispersives sur un réseau en forme d'étoile

We study Klein–Gordon equations on two half-axes with different dispersion relations. The reflection coefficient at the connecting point depends on the frequency. We obtain lower and upper bounds of the reflected part of the energy flow when the frequency band involved in the initial signal is sufficiently narrow. The reflection is delayed for low frequency wave packets and our expression of the delay is in accordance with the recent experiments of Haibel and Nimtz (Ann. Physik (Leipzig) 10 (2001) 707–712). The results are generalized to the case of a star-shaped network with n branches (n>2). To cite this article: F. Ali Mehmeti, V. Régnier, C. R. Acad. Sci. Paris, Ser. I 337 (2003).     

Flexible polyhedra in Minkowski 3-space

 We prove that (non-immersed) flexible polyhedra do exist in the Minkowski 3-space and each of them preserves the (generalized) volume and the (total) mean curvature during a flex. To prove the latter result, we introduce the notion of the angle between two arbitrary non-null nonzero vectors in the Minkowski plane. Received: 16 August 2001 Published online: 19 May 2003 Mathematics Subject Classification (2000): 52C25, 51B20, 52B70, 52B11, 51M25     

Comparing influence theories in voting games under locally generated measures of dissatisfaction

The Isbell desirability relation (I), the Shapley?CShubik index (SS) and the Banzhaf?CColeman index (BC) are power theories that grasp the notion of individual influence in a yes?Cno voting rule. Also, a yes?Cno voting rule is often used as a tool for aggregating individual preferences over any given finite set of alternatives into a collective preference. In this second context, Diffo Lambo and Moulen (DM) have introduced a power relation which ranks the voters with respect to how ably they influence the collective preference. However, DM relies on the metric d that measures closeness between preference relations. Our concern in this work is: do I, SS, BC and DM agree when the same yes?Cno voting rule is the basis for collective decision making? We provide a concrete and intuitive class of metrics called locally generated (LG). We give a characterization of the LG metrics d for which I, SS, BC and DM agree on ranking the voters.     

Scenario reduction in stochastic programming

 Given a convex stochastic programming problem with a discrete initial probability distribution, the problem of optimal scenario reduction is stated as follows: Determine a scenario subset of prescribed cardinality and a probability measure based on this set that is the closest to the initial distribution in terms of a natural (or canonical) probability metric. Arguments from stability analysis indicate that Fortet-Mourier type probability metrics may serve as such canonical metrics. Efficient algorithms are developed that determine optimal reduced measures approximately. Numerical experience is reported for reductions of electrical load scenario trees for power management under uncertainty. For instance, it turns out that after 50% reduction of the scenario tree the optimal reduced tree still has about 90% relative accuracy. Received: July 2000 / Accepted: May 2002 Published online: February 14, 2003 Key words. stochastic programming – quantitative stability – Fortet-Mourier metrics – scenario reduction – transportation problem – electrical load scenario tree Mathematics Subject Classification (1991): 90C15, 90C31     

Reduction of Courant algebroids and generalized complex structures

We present a theory of reduction for Courant algebroids as well as Dirac structures, generalized complex, and generalized Kähler structures which interpolates between holomorphic reduction of complex manifolds and symplectic reduction. The enhanced symmetry group of a Courant algebroid leads us to define extended actions and a generalized notion of moment map. Key examples of generalized Kähler reduced spaces include new explicit bi-Hermitian metrics on CP².     

Quantum integrability of Beltrami-Laplace operator as geodesic equivalence

Given two Riemannian metrics on a closed connected manifold , we construct self-adjoint differential operators such that if the metrics have the same geodesics then the operators commute with the Beltrami-Laplace operator of the first metric and pairwise commute. If the operators commute and if they are linearly independent, then the metrics have the same geodesics. Received: 11 February 2000; in final form: 20 August 2000/ Published online: 17 May 2001