Patrick Anderson
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780804758307
- eISBN:
- 9780804783224
- Item type:
- book
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804758307.001.0001
- Subject:
- Economics and Finance, Financial Economics
For decades, the traditional approaches to business valuation (market, asset, and income) have taken center stage in the assessment of the firm. This book presents an expanded valuation toolkit, ...
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For decades, the traditional approaches to business valuation (market, asset, and income) have taken center stage in the assessment of the firm. This book presents an expanded valuation toolkit, consisting of nine well-defined valuation principles hailing from the fields of economics, finance, accounting, taxation, and management. It ultimately argues that the “value functional” approach to business valuation avoids most of the shortcomings of its competitors, and more correctly matches the actual motivations and information held by stakeholders. To remedy the shortcomings of existing theory, the author proposes a new definition of the firm that is consistent with the principle that entrepreneurs maximize value, not profit.Less
For decades, the traditional approaches to business valuation (market, asset, and income) have taken center stage in the assessment of the firm. This book presents an expanded valuation toolkit, consisting of nine well-defined valuation principles hailing from the fields of economics, finance, accounting, taxation, and management. It ultimately argues that the “value functional” approach to business valuation avoids most of the shortcomings of its competitors, and more correctly matches the actual motivations and information held by stakeholders. To remedy the shortcomings of existing theory, the author proposes a new definition of the firm that is consistent with the principle that entrepreneurs maximize value, not profit.
Stephen Yablo
- Published in print:
- 2014
- Published Online:
- October 2017
- ISBN:
- 9780691144955
- eISBN:
- 9781400845989
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691144955.003.0005
- Subject:
- Philosophy, Philosophy of Language
Truth for Aristotle was a metaphysical notion. Alfred Tarski showed how to conceive truth semantically, that is, in such a way that it could play a foundational role in semantics. David Armstrong, ...
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Truth for Aristotle was a metaphysical notion. Alfred Tarski showed how to conceive truth semantically, that is, in such a way that it could play a foundational role in semantics. David Armstrong, the Aristotle of truthmaking, conceives it metaphysically, as the a posteriori necessitation of truths by “things in the world.” This chapter, in a Tarskian spirit, seeks a semantic conception of truthmakers. It suggests two formal models, the recursive and the reductive. They represent tendencies in truthmaker assignment that pull, at times, in different directions. Where one can be indulged at no cost to the other, as in the case of quantifiers, that is the way to go. Otherwise a compromise has to be struck. How the tendencies trade off depends on the application. To a first approximation, though, semantic truthmakers are facts that imply truths and proportionally explain them.Less
Truth for Aristotle was a metaphysical notion. Alfred Tarski showed how to conceive truth semantically, that is, in such a way that it could play a foundational role in semantics. David Armstrong, the Aristotle of truthmaking, conceives it metaphysically, as the a posteriori necessitation of truths by “things in the world.” This chapter, in a Tarskian spirit, seeks a semantic conception of truthmakers. It suggests two formal models, the recursive and the reductive. They represent tendencies in truthmaker assignment that pull, at times, in different directions. Where one can be indulged at no cost to the other, as in the case of quantifiers, that is the way to go. Otherwise a compromise has to be struck. How the tendencies trade off depends on the application. To a first approximation, though, semantic truthmakers are facts that imply truths and proportionally explain them.
Patrick L. Anderson
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780804758307
- eISBN:
- 9780804783224
- Item type:
- chapter
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804758307.003.0009
- Subject:
- Economics and Finance, Financial Economics
The author introduces the “recursive” model that has emerged within micro-economics over the past few decades. This modern recursive equilibrium model is contrasted with the neoclassical model, in ...
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The author introduces the “recursive” model that has emerged within micro-economics over the past few decades. This modern recursive equilibrium model is contrasted with the neoclassical model, in terms of the optimization and time periods involved. The modern, multi-period consumer savings problem is introduced, as well as the “cake eating” problem and basic pricing equation. The author argues these form the basis of a modern microeconomic theory, and that the stochastic discount factor that emerges from the basic pricing equation provides a valuable insight that is lacking in the neoclassical and classical worlds. As with other valuation principles, the author tests the principle as a practical valuation tool for three actual businesses, demonstrating that is provides an incomplete basis for valuation of private firms.Less
The author introduces the “recursive” model that has emerged within micro-economics over the past few decades. This modern recursive equilibrium model is contrasted with the neoclassical model, in terms of the optimization and time periods involved. The modern, multi-period consumer savings problem is introduced, as well as the “cake eating” problem and basic pricing equation. The author argues these form the basis of a modern microeconomic theory, and that the stochastic discount factor that emerges from the basic pricing equation provides a valuable insight that is lacking in the neoclassical and classical worlds. As with other valuation principles, the author tests the principle as a practical valuation tool for three actual businesses, demonstrating that is provides an incomplete basis for valuation of private firms.
Patrick L. Anderson
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780804758307
- eISBN:
- 9780804783224
- Item type:
- chapter
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804758307.003.0015
- Subject:
- Economics and Finance, Financial Economics
This chapter presents the theory behind the novel value functional method. This includes the importance of the definition of the firm introduced in this book, which includes separation, replicable ...
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This chapter presents the theory behind the novel value functional method. This includes the importance of the definition of the firm introduced in this book, which includes separation, replicable business practices, and an objective of the firm that is not restricted to profit maximization, the maximization of value, rather than profit, a whirlwind introduction to control theory, and the distinction between the familiar concept of a function and the obscure notion of a functional. The author then presents a functional equation (or Bellman equation) that relates the value of a firm to specific optimization by the manager or entrepreneur. This theory is the basis for the tenth approach to valuation described in this book: the “recursive” or “value functional” approach. The author concludes by proposing conditions for the existence of a solution to the value functional equation for actual firms, basing these in human transversality conditions that he outlines.Less
This chapter presents the theory behind the novel value functional method. This includes the importance of the definition of the firm introduced in this book, which includes separation, replicable business practices, and an objective of the firm that is not restricted to profit maximization, the maximization of value, rather than profit, a whirlwind introduction to control theory, and the distinction between the familiar concept of a function and the obscure notion of a functional. The author then presents a functional equation (or Bellman equation) that relates the value of a firm to specific optimization by the manager or entrepreneur. This theory is the basis for the tenth approach to valuation described in this book: the “recursive” or “value functional” approach. The author concludes by proposing conditions for the existence of a solution to the value functional equation for actual firms, basing these in human transversality conditions that he outlines.
Patrick L. Anderson
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780804758307
- eISBN:
- 9780804783224
- Item type:
- chapter
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804758307.003.0011
- Subject:
- Economics and Finance, Financial Economics
The idea of business investments assembled as part of an investment portfolio is a powerful one with ramifications that extend to the pricing of individual investments. The author describes the ...
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The idea of business investments assembled as part of an investment portfolio is a powerful one with ramifications that extend to the pricing of individual investments. The author describes the mean-variance framework, as outlined by Harvey Markowitz in the 1950s, as establishing the basis for an entire class of Modern Portfolio Theory models. The author then outlines the relationship between portfolio models and the Basic Pricing Equation, the most familiar of the portfolio models, the Capital Asset Pricing Model, including a recursive derivation of the CAPM that is somewhat closer to actual household behavior than the typical presentation, and the Roll critique of CAPM and similar models, and extends that critique noting that equity in 99% of firms do not fit into portfolio models. Portfolio models are then tested to see if they provide a practical basis for valuing three actual firms.Less
The idea of business investments assembled as part of an investment portfolio is a powerful one with ramifications that extend to the pricing of individual investments. The author describes the mean-variance framework, as outlined by Harvey Markowitz in the 1950s, as establishing the basis for an entire class of Modern Portfolio Theory models. The author then outlines the relationship between portfolio models and the Basic Pricing Equation, the most familiar of the portfolio models, the Capital Asset Pricing Model, including a recursive derivation of the CAPM that is somewhat closer to actual household behavior than the typical presentation, and the Roll critique of CAPM and similar models, and extends that critique noting that equity in 99% of firms do not fit into portfolio models. Portfolio models are then tested to see if they provide a practical basis for valuing three actual firms.
