Journal of Business Valuation and Economic Loss Analysis

Published by De Gruyter

Volume 1 Issue 1

January 2006

Issue of Journal of Business Valuation and Economic Loss Analysis

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Contents
Journal Overview

Article

October 6, 2006

Editorial Preface

Bradley Ewing, Jim Hoffman

October 6, 2006

Lost Profits Damages to New Businesses: Adjusting for Survival

David A MacPherson, Stanley P. Stephenson

Abstract

Survival risk of new businesses is a challenging issue to incorporate into lost profits analyses used in litigation, an issue some financial experts and courts ignore rather than consider explicitly. This paper considers several ways to make qualitative and quantitative adjustments for the survival rates of new businesses. The paper concludes firm-specific modeling of survival rates is the most appropriate way to weight future economic returns because it offers the best alternative in terms of fitting the analysis to the facts of the case and doing so in a credible and clear manner.

October 6, 2006

The Value of Life: A New Labor Theory-Based Model

Mahmoud Arayssi, Sarkis Joseph Khoury, Rania Uwaydah Mardini

Abstract

This paper develops a labor-based model where a worker chooses between not only work and leisure, as the traditional labor models have argued, but rather between labor, leisure and the purchase of insurance. The model allows the insurance buyer to determine the amount of insurance he is willing to work for and purchase while maximizing utility and derives the shadow price of risk, thus the value of life. The model is applied to quadratic, logarithmic, and exponential utility functions. Results can help insurance companies determine the cost of insurance associated with a specific job and related risk.

October 6, 2006

On the Time Series Properties of Medical Net Discount Rates

Amit Sen, Gregory Gelles

Abstract

We examine the time series properties of medical net discount rates based on five different medical consumer price indices, namely, medical care, medical services, medical care commodities, physician's services, and prescription drugs & medical supplies that were first analyzed by Ewing, Piette, and Payne (2003). Unlike Ewing, Piette, and Payne (2003), we test for the presence of a unit root in these series using statistics that allow for a break in the trend function at an unknown date, and find that all series are tend-break stationary. Therefore, practitioners should use medical net discount rate forecasts based on the estimated trend function in the post-break periods to calculate the present value of future medical costs.

October 6, 2006

The Pancake Palace: A Case Study in Business Interruption from the Defense Side

James A DiGabriele

Abstract

This case demonstrates the difficulties that can occur in business interruption cases when the insured is represented by a public adjuster. The Pancake Palace, a restaurant established for approximately thirty five years, suffered a business interruption due to a fire that completely destroyed the building housing their establishment. The maze created by the public adjuster submitting the claim to the insurance company, clearly exhibits the need for a special set of skills that include persistence, creativity, curiosity, common business sense and, deductive reasoning. Upon completion of this case, the reader should have an increased awareness of the techniques required when resolving business interruption claims of this nature.

October 6, 2006

A Methodology for Valuing Tiered Entities

Dennis A Webb, Lari B Masten

Abstract

The conventional approach to valuing limited partnerships is the net asset value method; however, when used to value interests in tiered entities, this approach can produce outlandish returns. The model failure occurs when its underlying assumptions are violated, and/or when the hypothetical buyer's expectations and the facts and circumstances of the case are not adequately represented. This article offers proof of the failure, an alternative approach to the entire process, and application via a case study taken from an actual assignment. The recommended process can be used for simple to extremely complex tiered asset ownership fact patterns and structures.

October 6, 2006

Business Valuation Basics for Attorneys

William P. Dukes

Abstract

Of all of the businesses in the Nation about .5% could be classified as actively traded, the other 99.5% require special treatment for valuation purposes. A number of the important issues are reviewed, all of which should be understood by all Attorneys who could have clients involved in business valuations. Issues are related to accounting practices, premiums, discounts of various sorts, required return, capitalization rates and proxies for variables not available. Most of the issues are illustrated in a practical valuation. Quantification of a number of the variables is illustrated as well.

About this journal

Objective
The Journal of Business Valuation and Economic Loss Analysis (JBVELA) is a refereed academic journal that publishes continuously throughout the year and is co-edited by Bradley Ewing and James Hoffman. The mission of the Journal of Business Valuation and Economic Loss Analysis is to improve the practice of business valuation, economic loss analysis, and risk management by helping to inform academics, practitioners, and attorneys about theoretical and practical developments in these fields.

Topics

business valuation
economic loss analysis
risk management

Article formats
Research articles
The journal publishes three categories of manuscripts. The first category encompasses both empirically- and conceptually-based manuscripts that advance the fields of business valuation, economic loss analysis, or topics related to risk. The second category of manuscripts focus on the description of how theory has been put into practice, including case study examples. The third category of manuscripts concerns how recent rulings and changes in the law affect business valuation, economic loss analysis, and risk management practices, assessment, and analysis.

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