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DISCOUNTED CASH FLOW WITH EXPLICIT REINVESTMENT RATES: TUTORIAL AND EXTENSION
Author(s) -
McDaniel William R.,
McCarty Daniel E.,
Jessell Kenneth A.
Publication year - 1988
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1988.tb01276.x
Subject(s) - extension (predicate logic) , net present value , cash flow , discounted cash flow , capital (architecture) , yield (engineering) , value (mathematics) , capital budgeting , present value , economics , work (physics) , mathematical economics , rate of return , computer science , econometrics , actuarial science , mathematics , microeconomics , finance , statistics , engineering , mechanical engineering , materials science , archaeology , production (economics) , project appraisal , metallurgy , history , programming language
This article discusses and critiques yield‐based capital budgeting techniques that have arisen over the past 30 years. Some have theoretical inconsistencies, while some work well only for certain kinds of problems. A new method, the marginal return on invested capital, is presented. The method's application is general; it gives accept/reject signals and rankings consistent with the net present value method.