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- Title
Capital Budgeting and Discounted Cash Equivalents: A Rejoinder.
- Authors
Ma, Ronald; Scott, Mark
- Abstract
This article compares several approaches used in the analysis of capital budgeting and discounted cash equivalents in corporate accounting by R.J. Chambers in one of his research papers published in the December 1978 issue of the journal "Abacus." It is believed that Chambers has focused on a major weakness in the conventional discounted cash flow approach to project evaluation--its disregard for the cash equivalents of assets at intermediate stages of the project life. Further, Chambers proposes a discounted cash equivalent flow method in which these cash equivalents are incorporated into the evaluation. According to the authors, the weakness in the discounted cash flow approach addressed by Chambers is derived from a simplifying assumption of conventional analysis, that a project's life is known with certainty. Potential cash flows associated with alternative life spans and, in particular, potential asset abandonment values over the project life are ignored in the analysis, since a deterministic project life has been assumed.
- Subjects
CAPITAL budget; DISCOUNTED cash flow; CHAMBERS, Raymond John, 1917-1999; CAPITAL investments; CASH &; cash equivalents; CORPORATE accounting; CORPORATE finance; CASH management
- Publication
Abacus, 1980, Vol 16, Issue 1, p73
- ISSN
0001-3072
- Publication type
Article
- DOI
10.1111/j.1467-6281.1980.tb00088.x