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"Present value analysis."
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Economic Implications of Nonlinear Pricing Kernels
Based on a family of discrepancy functions, we derive nonparametric stochastic discount factor bounds that naturally generalize variance, entropy, and higher-moment bounds. These bounds are especially useful to identify how parameters affect pricing kernel dispersion in asset pricing models. In particular, they allow us to distinguish between models where dispersion comes mainly from skewness from models where kurtosis is the primary source of dispersion. We analyze the admissibility of disaster, disappointment aversion, and long-run risk models with respect to these bounds.
This paper was accepted by Jerome Detemple, finance
.
Journal Article
Evaluating Biosimilar Development Projects: An Analytical Framework Utilizing Net Present Value
The increasing prominence of biosimilars in healthcare delivery has created the need for robust financial evaluation methods to assess development opportunities. Unlike traditional generic drugs, biosimilars require substantial investments ($100-250 million) and longer development timelines (6-8 years), necessitating sophisticated evaluation approaches.
This study presents a comprehensive Net Present Value (NPV) analysis framework specifically designed for biosimilar development projects. Our framework incorporates key technical, regulatory, and commercial factors through a risk-adjusted NPV methodology, validated through case studies of three monoclonal antibody biosimilar development programs.
The analysis reveals that successful projects require minimum peak sales of $250-300 million to achieve a positive NPV, with market share and manufacturing efficiency serving as critical value drivers. Cost analysis shows that clinical development represents the largest share (57%) of total development costs.
The framework demonstrates that early market entry, manufacturing optimization, and market share achievement are key success factors, whereas technical complexity and competitive intensity significantly influence risk-adjusted returns.
Journal Article
Economic Implications of Nonlinear Pricing Kernels
Based on a family of discrepancy functions, we derive nonparametric stochastic discount factor bounds that naturally generalize variance, entropy, and higher-moment bounds. These bounds are especially useful to identify how parameters affect pricing kernel dispersion in asset pricing models. In particular, they allow us to distinguish between models where dispersion comes mainly from skewness from models where kurtosis is the primary source of dispersion. We analyze the admissibility of disaster, disappointment aversion, and long-run risk models with respect to these bounds.
Journal Article
Plasma Assisted Combustion as a Cost-Effective Way for Balancing of Intermittent Sources: Techno-Economic Assessment for 200 MWel Power Unit
Due to the increasing installed power of the intermittent renewable energy sources in the European Union, increasing the operation flexibility of the generating units in the system is necessary. This is particularly important for systems with relatively large installed power of wind and solar. Plasma technologies can be used for that purpose. Nonetheless, the wide implementation of such technology should be economically justified. This paper shows that the use of plasma systems for increasing the flexibility of power units can be economically feasible, based on the results of a net present value analysis. The cost of the installation itself had a marginal effect on the results of the net present value analysis. Based on the performed analysis, the ability to lower the technical minimum of the power unit and the relationship between such a technical minimum and the installed power of a plasma system can be considered decisive factors influencing the economics of the investment for such an installation. Further research on better means of prediction of the minimum attainable load, which would allow determining the influence of implementation of a plasma system, is recommended. This will be the decisive factor behind future decisions regarding investing in such systems.
Journal Article
ECONOMIC FEASIBILITY STUDY FOR PAPER WASTE RECYCLING PROJECT
The aim of this study is to investigate the economic feasibility of paper recycling factories in Iraq by studying the technical, marketing and financial feasibility to establish a paper-recycling factory in Najaf Governorate and to show the importance of these projects in achieving sustainable efficiency as well as achieving economic efficiency. The expected investment and operating costs were estimated and then the economic profitability criteria were adopted in addition to conducting a sensitivity analysis and determining the break-even amount. The research hypothesis was proven, which confirms that there is an economic, an environmental and marketing feasibility for paper waste recycling projects, as it was found that the project recovers all the money invested in it within a year and a month and a half, and the accounting return rate reached 82%. The net present value was (78,403,069,418) Iraqi dinars, while the discounted profitability index criterion was about (2.546). The internal rate of return criterion was (115%). The risk analysis proved that the project can withstand a 60% decrease in its revenues, and the break-even point quantity was about 1729 tons. The sensitivity analysis also proved that the project is insensitive to changes in investment costs and operating costs, and insensitive to fluctuations in the prices of the project's products. In light of the results, it was found that the project is economically feasible. The study recommended the need to support waste recycling projects as they contribute to achieving environmental sustainability and economic efficiency.
Journal Article
Comparison between Underground Cable and Overhead Line for a Low-Voltage Direct Current Distribution Network Serving Communication Repeater
This paper compares the differences in economic feasibility and dynamic characteristics between underground (U/G) cable and overhead (O/H) line for low-voltage direct current (LVDC) distribution. Numerous low loaded long-distance distribution networks served by medium-voltage alternative current (MVAC) distribution lines exist in the Korean distribution network. This is an unavoidable choice to compensate voltage drop, therefore, excessive cost is expended for the amount of electrical power load. The Korean Electric Power Corporation (KEPCO) is consequently seeking a solution to replace the MVAC distribution line with a LVDC distribution line, reducing costs and providing better quality direct current (DC) electricity. A LVDC distribution network can be installed with U/G cables or O/H lines. In this paper, a realistic MVAC distribution network in a mountainous area was selected as the target model to replace with LVDC. A 30 year net present value (NPV) analysis of the economic feasibility was conducted to compare the cost of the two types of distribution line. A simulation study compared the results of the DC line fault with the power system computer aided design/electro-magnetic transient direct current (PSCAD/EMTDC). The economic feasibility evaluation and simulation study results will be used to select the applicable type of LVDC distribution network.
Journal Article
Production and Inventory Model Using Net Present Value
Using the net present value is the standard methodology in theoretical analysis, and the most frequently used method for making financial decisions. However, net present value is rarely used in production and inventory decisions. The main reasons appear to be the complexity of the formulae and the robustness of the EOQ model. We investigate the general multiproduct, multistage production and inventory model using the net present value of its total cost as the objective function. A power-of-two heuristic gives us a near optimal solution to this problem. If the base period is fixed (or varied), the solution based on the best power-of-two heuristic will be within 6.2% (or 2.1% ) of the optimal. This result is surprisingly similar to models using the long-term average cost. The average cost does not reflect the time value of money. Does this mean that decisions based on average cost are significantly inferior to those based on net present value? The answer is quite surprising. If we include discounted production cost in the holding cost, it turns out that the decision based on average cost is only 9.6% (in terms of the net present value of the total cost) worse than the decision based on the net present value. However, the reorder interval based on the average cost could be much longer than that derived using net present value. This result shows that average cost is a good approximation to the net present value when the demands are deterministic.
Journal Article
Economic feasibility analysis for co-generation of power by diesel generator at peak time: Monte Carlo simulation approach in a hospital
The cost of electricity in hospitals represents a significant portion in its context of operating expenses. Therefore, it is important to constantly think about ways to reduce this cost without losing the quality and reliability required for hospital care activity. It is well known, that reducing electricity consumption has a direct impact on the effective management of hospital cash flow, so it is imperative to rationalize this resource. In this context, the objective of this paper focuses on analyzing the economic feasibility of purchasing and using a diesel generator to find the peak hour demand and verifying financial uncertainty by applying a Monte Carlo simulation approach to risk analysis. The target hospital of this research is located in southeastern of Brazil and it is part of a foundation that covers educational and assistance activities, serving the local population and thousands of patients during the year. Finally, the economic risk analysis applied through the Monte Carlo simulation found that the acquisition of the aforementioned diesel generator has a very high probability of viability. Therefore, it is verified that the investment is viable and attractive from the hospital's economic and operational point of view, while the Net Present Value remains positive, with the expected value of R$ 868,358.84, considering the risk and uncertainty analysis having an attractive internal returning rate of 78.76% per year.
Journal Article
Economic Analyses for the Evaluation of is Projects
Information system projects usually have numerous uncertainties and several conditions of risk that make their economic evaluation a challenging task. Each year, several information system projects are cancelled before completion as a result of budget overruns at a cost of several billions of dollars to industry. Although engineering economic analysis offers tools and techniques for evaluating risky projects, the tools are not enough to place information system projects on a safe budget/selection track. There is a need for an integrative economic analysis model that will account for the uncertainties in estimating project costs benefits and useful lives of uncertain and risky projects. The fuzzy set theory has the capability of representing vague data and allows mathematical operators and programming to be applied to the fuzzy domain. The theory is primarily concerned with quantifying the vagueness in human thoughts and perceptions. In this article, the economic evaluation of information system projects using fuzzy present value and fuzzy B/C ratio is analyzed. A numerical illustration is included to demonstrate the effectiveness of the proposed methods.
Journal Article