This paper addresses the differences between the Modigliani-Miller [M&M] model (1958, 1963) and the Miles-Ezzell [M&E] model (1980, 1985). The main difference between these two models concerns the stochasticity of the free cash flows. While M&M assumes a strictly stationary process, M&E’s process is a martingale. However, this subtle difference has not been fully exposed, and previous literature has produced partly erroneous statements or inconsistent valuation models. Therefore, the main objective of this paper is to illustrate and accentuate the effect of these two mutually exclusive stochastic processes on the timely behavior of cash flows, discount rates, and values of the firm, equity, debt, and tax shield. For this purpose, we perform a numerical experiment that allows the determination of values and discount rates by means of the risk-neutral approach. We show that in the M&E model, all cash flows and values are path-dependent, while they are not in M&M’s world. Furthermore, in M&E’s model, all discount rates are time-invariant, except for the discount rate applied to tax shields, which depends on the lifetime of the cash flows. Contrarily, in the M&M setup, all discount rates change across time, except for the constant discount rate of the tax shield. This has consequences for the applicability of the well-known present-value formula for annuities and for building consistent valuation models for both finite and perpetual cash flows.
Becker, Mike Denis (2020)
The translation between the required return on unlevered and levered equity for explicit cash flows and fixed debt financing
This paper represents a model that supports the choice of efficient service portfolios at a cloud service broker. Among the many types of different cloud service brokers, we focus on a firm that offers service bundles that are composed from different services of different internet software providers. The necessary integration, aggregation, and customization of services can be time consuming and costly. Whenever the cloud broker can choose from many service combinations, but has limited human resources with critical time to market, it is essential to prioritize some of the service bundles, markets, services, and internet software providers. The purpose of this paper is to facilitate this kind of decision. Moreover, both the time and resources required for creating service offerings and the customers' demand for these service bundles are subject to uncertainty. Because of this uncertainty, a cloud broker needs to be guided to potential service portfolios that give the best trade‐off between risk and profitability. Our model helps the decision maker to identify efficient service portfolios, ie, service portfolios that for a given risk have the highest profitability or for a given profitability have the lowest risk. Our paper shows the application of this model to a cloud broker that mediates mainly software as a service bundled with mobile subscriptions for telephony (calling and messaging) and internet access. The model is inspired by the ideas from financial portfolio optimization and product‐mix decisions under scarce resources. The model corresponds to a linear stochastic optimization problem with an objective function that balances risk and profitability.
Becker, Denis & Berg, Terje (2017)
Kostnadsfordeling under usikkerhet og risiko eksemplifisert med aktivitetsbasert kalkulasjon
Busch, Tor; Olaussen, Jon Olaf & Pettersen, Inger Johanne (red.). Bred og spiss! NTNU Handelshøyskolen 50 år: En vitenskapelig jubileumsantologi
Becker, Denis (2017)
Giret egenkapitalavkastningskrav for kontantstrømmer med begrenset levetid og gitt gjeldsfinansiering
Busch, Tor; Olaussen, Jon Olaf & Pettersen, Inger Johanne (red.). Bred og spiss! NTNU Handelshøyskolen 50 år: En vitenskapelig jubileumsantologi
Berg, Terje & Becker, Denis (2017)
The never-ending cost allocation puzzle – Treatment of Uncertainty and Risk
Target costing is a modern approach applied during product development that defines cost targets for products and its components. These cost targets are driven by customer requirements and achievable revenues. The intention of this paper is the integration of target costing with modern concepts of modelling uncertainty and management of risk based on optimisation. Contrary to the traditional focus of target costing on cost targets, this paper prefers a strategy for achieving a target profit. Moreover, in this paper target costing is understood as a continuous process with incremental changes of cost drivers, product and component design as well as product prices. Therefore, the change in costs and profit with respect to aforementioned control parameters is modelled by linear approximations. Hence, improved decisions concerning design and prices are derived by linear programming models. In practice, information concerning product and component costs, demand or customer preferences are not given with certainty. Therefore, we apply a stochastic programming approach to manage the risk inherent in the target costing process. After a general presentation, we apply our approach to the provision of an information and communication technology service where the level of uncertainty is considerable.
Gonzalez, Andres J.; Helvik, Bjarne Emil, Tiwari, Prakriti, Becker, Denis & Wittner, Otto J. (2015)
GEARSHIFT: Guaranteeing availability requirements in SLAs using hybrid fault tolerance
Fahmy, Sonia; Li, Baochun & John, Lui (red.). 2015 IEEE Conference on Computer Communications (INFOCOM)
Becker, Denis & Gaivoronski, Alexei A. (2014)
Stochastic optimization on social networks with application to service pricing
Gaivoronski, Alexei A. & Becker, Mike Denis (2011)
Differentiated Service Pricing on Social Networks Using Stochastic Optimization
Jacobsen, Hans-Arno; Wang, Yang & Hung, Patrick (red.). Proceedings — 2011 IEEE International Conference on Services Computing • SCC2011
This paper develops a combined simulation and optimization model that allows to optimize different service pricing strategies defined on the social networks under uncertainty. For a specific reference problem we consider a telecom service provider whose customers are connected in such network. Besides the service price, the acceptance of this service by a given customer depends on the popularity of this service among the customer's neighbors in the network. One strategy that the service provider can pursue in this situation is to stimulate the demand by offering the price incentives to the most connected customers whose opinion can influence many other participants in the social network. We develop a simulation model of such social network and show how this model can be integrated with stochastic optimization in order to obtain the optimal pricing strategy. Our results show that the differentiated pricing strategies can increase substantially the revenue of a service provider operating on a social network.
Becker, Mike Denis (2019)
Understanding the Difference between Cash Flows in the Modigliani-Miller Model and the Miles-Ezzel Model
[Academic lecture]. NTNU Business School Conference 2019.
Becker, Mike Denis; Solberg, Harry Arne & Heyerdahl, Gaute (2019)
The Economic Challenges of Hosting Major Sports Events Why the problematic history repeats itself?
[Academic lecture]. 12th EIASM WORKSHOP ON THE CHALLENGES OF MANAGING THE THIRD SECTOR.
Becker, Mike Denis; Solberg, Harry Arne & Heyerdahl, Gaute (2019)
The Economic Challenges of Hosting Major Sports Events Why the problematic history repeats itself?
[Academic lecture]. 27th EUROPEAN SPORT MANAGEMENT CONFERENCE.
Solberg, Harry Arne; Becker, Denis, Denstadli, Jon Martin, Heldal, Frode, Knardal, Per Ståle & Thøring, Thor Atle (2018)
Sykkel-VM 2017. Fra folkefest til økonomisk bakrus.
[Report]. NTNU: Center for Sport and Culture Management Research.
Becker, Denis; Gaivoronski, Alexei A. & Nesse, Per Jonny (2016)
Service Portfolio Optimization of Cloud Broker
[Academic lecture]. Workshop and PhD Seminar in Management Accounting and Control.
Becker, Denis; Gaivoronski, Alexei A. & Nesse, Per Jonny (2016)
Activity Based Service Portfolio Optimization of Cloud Broker
[Academic lecture]. ICSP 2016: XIV International Conference on Stochastic Programming.
This paper represents a model for managing the service portfolio of a cloud broker. More precisely, we presume a cloud broker that operates a platform for integrating, aggregating and sales of cloud services. The cloud broker faces a limited amount of human resources which are necessary to deal with the legal, technical and economic activities that are required for this kind of endeavor. Hence, the cloud broker needs to decide which services, service bundles and markets to focus on. For this situation we develop an optimization problem that can be used to select the service program with the highest profit potential. Moreover, sales numbers, service prices and resource usage cannot be estimated with certainty, which implies the risk of missing financial and operational targets. The model therefore allows for balancing the expected profit against this risk. The resulting model can be classified as a combined stochastic assignment and knapsack-problem with several capacity constraints. The paper points out the short comings of traditional activity based management for this kind of practical problem.
Berg, Terje & Becker, Denis (2015)
Cost-Based Pricing by Means of Cost Allocation under Uncertainty and Risk
[Academic lecture]. 12th Annual Conference for Management Accounting Research.
Gaivoronski, Alexei A. & Becker, Mike Denis (2008)
Quantitative Networks Analysis and Modeling of Networked Multiagent Environment
[Article in business/trade/industry journal]. Telektronikk, s. 76- 94.
Academic Degrees
Year
Academic Department
Degree
2011
Norwegian University of Science and Technology
Ph.D.
Work Experience
Year
Employer
Job Title
2012 - Present
BI Norwegian Business School
Adjunct Associate Professor
2011 - Present
Sør-Trøndelag University College
Associate Professor
2006 - 2011
Norwegian University of Science and Technology at the Institute for Industrial Economics and Technology Management
PhD student and Employee
2001 - 2006
Chemnitz University of Technology
Lecturer at the Department of Controlling and Managerial Accounting
2001 - 2006
University of Applied Science
Periodical visiting lecturer
2001 - 2006
University of Applied Science
Periodical visiting lecturer
2004 - 2004
RTG Dresden
Visiting Lecturer
2004 - 2004
University of Economics Varna
Visiting Lecturer
2003 - 2003
Molde University College
Visiting Lecturer
2003 - 2003
AVS Meissen
Visiting Lecturer
2002 - 2002
Graduate School of Economics, the Higher School of Commerce and Finance