Case Studies & Papers

The following represent some case studies of pragmatic approaches Accession Capital Corp. has applied in real-world problems.  They are written in a quasi-academic style, however, they are meant to serve as a practical solution for financial measurement issues often encountered when attempting to merge financial theory with actual data.

Click on the title to view the case study in PDF format.

Acquisitions & Divestitures - Reducing the Purchaser's perceived risk will benefit both parties

This article considers why the Vendor’s predisposition towards non-disclosure may often work against him in negotiating the highest price in a business sale.  Finding effective ways of transferring perceived risk to the most appropriate party will increase net benefits to both Vendor and Purchaser.

Acquisitions & Divestitures - Valuing Acquired Tax Loss Carry-Forward Pools

This article examines some of the CRA rules with respect to ‘Acquisition of Control’ and considers those circumstances when the cumulative tax losses of the target firm may be deductible to the acquirer.  A simple methodology is suggested in arriving at an estimated value of the acquired taxes losses.

Cost of Capital - The Price-Earnings Ratio and its Common Misapplication in Business Valuations

This paper considers how widespread the P/E Ratio has become in the financial press and how unreliable this statistic is in all but a very few business valuation situations.

Cost of Capital - On The Practicality of Using A Single Point-Estimate of The Discount Rate in Long-Term Cash Flow Valuation

This paper ponders the outcome reliability of a single-point discount rate estimate that is really meant to reflect a range of discount rates that are expected to be incurred throughout the life of the underlying cash flows.  The appendix speaks to the difficulty of imputing discount rates from only observing publicly available market data. 

Cost of Capital - Junior Oil and Gas Firms Cost of Equity Approximation: A Continuation of the pragmatic use of the Sharpe Ratio employed June 2008"

This paper serves as an update to 'Approximating the minimum Cost of Equity for junior oil and gas firms during times of high commodity price uncertainty'.  It re-examines the applicability of ex-post financial measures in the face of the severity of recent market declines.

Cost of Capital - Approximating the minimum Cost of Equity for junior oil and gas firms during times of high commodity price uncertainty

This paper considers the difficulty in applying traditional cost of capital techniques when annual stock price volatility for junior oil and gas plays commonly exceed 100%.  The Sharpe Ratio is used to determine the Market price of risk and in turn set a minimum expected cost of equity.

Cost of Capital - Regressing Beta from Historical Stock Prices

This paper considered the effects of non-systematic price impacts on the accuracy of regressed stock betas.  The study design begins with a hypothetically ‘pure’ stock history, and then adds random noise in order to test the impacts on the resultant Betas.

Cost of Capital - R-Squared & the T Statistic as an indicator of Regressed Beta Accuracy

This paper is a continuation of “Sensitivity of Stock Betas to Non-Systematic Price Changes� and attempts to empirically show the predictive qualities of R-Squared and T Statistic hypothesis testing to the accuracy of regressed Betas.

Cost of Capital -  Measuring the Error of Estimation in Grouped Stock Betas

This paper is the conclusion of a three-part series that deals with identifying, measuring and mitigating the impacts of non-systematic price distortions to regressed stock betas.

Cost of Capital - Use of Black’s Model in restructuring capital of income trust

This paper describes the application of Black’s interest rate-cap model in the equity restructuring of a mid-size income trust.  The conclusions show that derivative models can be successfully used as normative predictors of hybrid capital structures.

Cost of Capital - Misapplication of WACC in the assessment of Project Value

This paper identifies an oft repeated error in using firm-wide Weighted Average Cost of Capital to evaluate the price of target acquisitions or assess the value of new projects or assets.

Industry Specific - Method of modeling expected future growth in appreciating assets

This paper considers the indisputable fact that the future growth expectations of appreciating assets (specifically land, in this case) must be inherently reflected in their current market prices.  It offers one possible method of modeling this growth profile using the Gordon Growth Model. 

Industry Specific - Lease, Finance or Purchase Decisions: Commercial Aircraft

This paper describes how the three financing options available in acquiring commercial aircraft; Leasing, Borrowing or Purchasing Outright, often have significantly different after-tax (Canadian) financial implications.

Industry Specific - Use of Monte Carlo Simulation in Expected Cost/Revenue Planning

This short newsletter is a brief description of the usefulness of a Monte Carlo approach to the Best/Worst/Expected case Revenue & Cost planning exercise.  It is specifically targeted to the charter aviation operator and explains how simple random simulation can substantial improve the predictive qualities of your operational budgets.