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- Title
Discounted Cash Equivalents: A Note in Response.
- Authors
Chambers, R. J.
- Abstract
This article presents a response to a criticism on the proposed discounted cash equivalent flow (DCEF) as a new method for project evaluation. The DCEF proposal was related to a particular anomaly. Intuitively, of otherwise equal projects, that which entails an investment in a durable asset having a money equivalent throughout the term of the project is preferable to one which entails the use of an asset having a realizable or scrap value only at the terminal date of the project. As the object of present value calculations is to provide a means of discriminating between projects, one might suppose that the calculation should provide an indication of the superiority in that respect of the former project. The traditional discounted cash flow calculation does not discriminate between a locked-in investment and a revocable investment. It may be of interest to sketch the context in which the DCEF proposal was developed. For the purpose of making any decision of material consequence, use is made of the contents of periodical accounts of a past period, of exploratory budgets for a succeeding period or periods and of present value calculations. The dominant principles are the temporal relevance to action of the information and the accrual principle.
- Subjects
DISCOUNTED cash flow; CASH &; cash equivalents; PROJECT evaluation; ASSETS (Accounting); NET present value; ACCRUAL basis accounting; CORPORATE accounting
- Publication
Abacus, 1978, Vol 14, Issue 2, p188
- ISSN
0001-3072
- Publication type
Article
- DOI
10.1111/j.1467-6281.1978.tb00068.x