CAPITAL BUDGETING UNDER RISK: A MATHEMATICAL-PROGRAMMING APPROACH.
PRINCETON UNIV N J ECONOMETRIC RESEARCH PROGRAM
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The study considers the problem of capital budgeting under risk for a firm operating in an imperfect capital market. The capital-budgeting problem is defined as the problem of allocating fixed budget dollars in each of several time periods among competing investment proposals. The total fixed amount of money available for investment purposes in any period and the composition of the financing of that amount are taken as given. Subject to an absolute borrowing limit in each period, the firm can borrow and lend funds at constant but divergent rates of interest with the borrowing rate exceeding the lending rate. The gross returns from the potential projects are stochastic everything else is assumed to be known with certainty.
- Economics and Cost Analysis
- Operations Research