Consequently, this paper provides approaches for the future evaluation of human capital and a conceptual context for empirical studies. This theory thus forms the foundation for the quantification of human capital's inherent opportunities and risks. Our result shows that the real options theory provides a theoretical framework for the evaluation of human capital and allows a differentiated analysis that, on a qualitative basis, enables investments in uncertainties that are associated with human capital. In particular, it is difficult for many traditional approaches to integrate notions of flexibility and options with regard to the human capital of companies. This paper discusses why so many traditional evaluation methods are only partly appropriate for categorizing, analyzing and evaluating human capital's special characteristics. Due to human capital's great importance for economic value creation, a series of studies on human capital evaluation have been published during the last few years. However, in contrast to other value-creating factors, human capital is more difficult to measure, evaluate and manage. The human capital represented by corporate employees involved in the information and knowledge economy is becoming an increasingly central value-creating factor in global competition. This post includes excerpts from the book Forest Finance Simplified. For some, it is an intuitively difficult concept to grasp.While your crystal ball may prove infallible, mine has shown cracks at times. NPV assumes you can accurately assess and predict future cash flows.Opportunity costs change and differ across investors. Consider capitalization (“cap”) rates in commercial real estate. Discount rates, like interest rates, can and do change year-to-year. NPV also assumes the discount rate is the same over the life of the investment or project. If you have multiple projects and excess capital, you can add up projects to get a sense of aggregate wealth creation from all investable projects. Real options valuation has been advocated as an appropriate valuation method for high-risk projects. For forestry investments, which tend to be long-term, this is critically and entirely appropriate. NPV recognizes the time value of money (unlike cash-on-cash returns or simple payback period).NPV uses cash flows rather than net earnings (which includes non-cash items such as depreciation).NPV is straightforward to calculate (especially with a spreadsheet).It works for comparing marginal forestry investments to multi-billion-dollar projects or acquisitions. It estimates wealth creation from the potential investment in today’s dollars, given the applied discount rate. The use of NPV as an investment and capital budgeting criterion features key advantages and disadvantages. The decision rule is to accept and pursue projects with NPVs greater than or equal to zero, as this implies the project meets or exceeds your “hurdle” rate or expected rate of return. Applicability: what does the calculated real option value represent. Net present value (NPV) compares the value of cash flows (benefits) received in the future with the capital required for investment today. The emphasis is on three fundamental issues surrounding each proposed approach: 1. A summary of the advantages and disadvantages of applying and interpreting NPV generally and for forestry investments.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |