For more than 50 years, one fundamental flaw had wreaked havoc in the corporate world, breeding 'Financial Crisis' like a silent cancer, undetected. Billions of dollars have been destroyed due to corporate bankruptcies, and entire economies suffered, while the root cause remained hidden. Even the 2013 Nobel Economics Prize Committee hit a dead end after several years of research by eminent experts in economic sciences, and minced no words in saying '“....we do not yet have complete and generally accepted explanations for how financial markets function......Mispricing of assets may contribute to financial crises”. But all this can become history, because the cure for the fiscal cancer has now been found.

1. Rational
Investor
Vs.
Corporate
Finance
Chronic conflict = Financial Crisis
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Sci

2. Financial Planning
Standards Board Ltd
Certified Financial
Planner Board of
Standards
Highest
Global
Standard
Financial planning
professionals help investors
make rational investment
decisions, promote long
term investment planning
aligned with defined goals.
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Sci

3. Rational investors follow &
expect long term equity
returns linked to business
performance, not
speculative short term price
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Sci

4. Long term planning
makes short term
volatility irrelevant
“ The riskiness of an investment is not
measured by beta but rather by the reasoned
probability of that investment causing its
owner a loss of purchasing power over his
contemplated holding period.”
period
Warren E. Buffett, Chairman, in a letter to Shareholders of
Berkshire Hathaway, February 25, 2012
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

5. Jan,1990 to Feb,2014
Berkshire
Hathaway
The Result
Dow Jones
Index
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

6. What Corporate
Finance Prescribes
“the opportunity cost of capital depends
on the project’s beta. ...Siemens, a
Siemens
German industrial giant, uses 16
different discount rates, depending on
rates
the riskiness of each line of its business.”
Fundamentals of Corporate Finance, 3rd edition, ISBN 0-07553109-7, Richard A. Brealey, Stewart C. Myers, Alan J.
Marcus, Stephen A. Ross, Randolph W. Westerfield, Bradford
D. Jordan, pages 421-423.
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

7. Feb,2004 to Feb,2014
The Result
Siemens
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

8. Both, the ‘short-term’
and ‘beta’ are irrelevant
for ‘opportunity cost’ of
equity
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

9. Corporate financial
practice conflicts with
rational investor
expectations, breeds
‘Financial Crisis’
such as 2008
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

10. “....we do not yet have complete
and generally accepted
explanations for how financial
markets function......Mispricing
of assets may contribute to
financial crises”
crises
- 2013 Nobel Economic Sciences
Prize Committee
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

11. Raises questions,
‘Financial Economics’
never asked
Answers those,
‘Financial Economics’
never could
To prevent ‘FINANCIAL CRISIS’, and transform
‘Financial Management’ from a ‘Cultivated Art’
into a truly ‘Objective Science’
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies

12. http://valueerodingfallacies.blogspot.in
Copyright 2013: Rajesh D. Mudholkar, Author, The Timeless Essence of Financial Science, http://valueerodingfallacies