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| Author: | Thompson, R. A. Thuesen, G. J. |
| Title: | Applications of dynamic investment criteria for capital budgeting decisions. |
| Journal: | Engineering Economist
1987 : FALL, VOL. 33:1, p. 59-86 |
| Index terms: | CAPITAL BUDGETING DECISION MAKING DYNAMIC MODELS DYNAMIC PROGRAMMING |
| Language: | eng |
| Abstract: | Cardinal utility concepts are utilized in the development of three investment decision criteria that dynamically reflect changes in the economic health of the firm. These new criteria are the time-weighted criterion, the discounted certainty equivalent criterion and the horizon utility criterion. For purposes of comparison two traditional investment criteria, the expected present value criterion and the mean-variance criterion are applied. On the basis of nine different performance measures the effectiveness of the five above mentioned criteria are compared. Numerical examples are presented to a process where decisions are made in a sequential, periodic manner. Some conclusions are drawn. |
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