... rate for safe projects. Here, valuing risky projects introduces a new dimension to the theory of investment. We have shown that this new dimension can be treated by transforming each future cash flow into its certainty equivalent. By doing this, one is back to the problem of evaluating a safe project...

...Table 22. Net cash flows from the Fiesco contract under three repayment scenarios Baseline scenario Fleet contingency King’s discretion April 1591 14,931 14,931 14,931 May 1591 −25,884 −25,884 −25,884 June 1591 −25,884 −25,884 −25,884...

...This chapter discusses some basic steps toward an asset pricing model in which investors face a high-dimensional learning problem. It mentions investors in the model that use a set of covariates to forecast firm cash flows and price stocks based on these forecasts. To make these forecasts...

...This chapter discusses prediction problems that are central to asset pricing, emphasizing that investors must forecast firms' future cash flows when it comes to price stocks. Researchers testing asset pricing models look for predictor variables that can forecast return differences between assets...