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Benefit‐Cost Ratios Versus Net Present Value: Revisited
Author(s) -
HOSKINS C. G.
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.tb00862.x
Subject(s) - ranking (information retrieval) , economics , net present value , value (mathematics) , investment (military) , capital (architecture) , actuarial science , econometrics , microeconomics , financial economics , mathematics , computer science , production (economics) , statistics , archaeology , machine learning , politics , political science , law , history
This paper extends the rigorous examination and comparison, begun by Schwab and Lusztig, of the ranking characteristics of Benefit‐Cost Ratios and Net Present Value. The algebraic analysis shows the circumstances under which these evaluation techniques give a contradictory ranking of investment projects and identifies the differing implicity reinvestment assumptions; the validity of these assumptions is examined. There is still dispute concerning which technique is preferable under uncertainty and which under capital rationing; this paper attempts to resolve these issues.