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| Author: | Anderson, G. A. Prakash, A. J. |
| Title: | A note on simple resource allocation rules : The case of arithmetic growth |
| Journal: | Journal of Business Finance and Accounting
1990 : WINTER, VOL. 17:5, p. 759-762 |
| Index terms: | RESOURCE ALLOCATION CASH FLOW NET PRESENT VALUE DECISION MAKING |
| Language: | eng |
| Abstract: | A simplifying formula is developed for the present value computation when future cash flows are increasing or decreasing in a constant arithmetic progression (linear trend) for a constant discount rate. Furthermore the earlier resource allocation work of Prakash, Dandapani and Karels is extended to the case when the periodic cash flows follow an arithmetic progressive series. It is demonstrated that a theoretically appropriate payback period may be simply defined in terms of the arithmetic growth in cash flows that will result in the same accept/reject decision as the net present value method. |
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