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| Author: | Freeman, M. Freeman, K. |
| Title: | Considering the time value of money in breakeven analysis |
| Journal: | Management Accounting (London)
1993 : JAN, VOL. 71:1, p. 50-58 |
| Index terms: | BREAK-EVEN ANALYSIS TIME VALUATION MONEY |
| Language: | eng |
| Abstract: | The authors show that it is inconsistent to appraise investments using discounted cashflow techniques like net present value and then make operating decisions using breakeven analysis based on profits. They demonstrate that operating at the breakeven profit level will in fact destroy value. This can only reduce chances of survival and growth. In the authors' example of a large investment it is shown that at higher interest rates, the value destroyed increases. |
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