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Inflation and Capital Budgeting Decisions: a Comment
Author(s) -
GRINYER JOHN R.
Publication year - 1974
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1974.tb00856.x
Subject(s) - inflation (cosmology) , capital budgeting , net present value , economics , value (mathematics) , cash flow , present value , time value of money , capital (architecture) , cash , cost of capital , financial economics , finance , monetary economics , actuarial science , macroeconomics , microeconomics , production (economics) , computer science , profit (economics) , history , physics , archaeology , machine learning , theoretical physics , project appraisal
F. M. Wilkes has argued that unadjusted cash flows and monetary opportunity costs be used when evaluating capital projects in an inflationary environment (Journal of Business Finance, Volume 4, No. 3). His conclusions are, however, that alternative approaches to net present value are probably necessary, This note examines Wilkes' analysis and argues that his initial model, using net present value techniques, is acceptable in practice on the adoption of fairly conventional assumptions.