A NOTE ON BIAS IN CAPITAL BUDGETING INTRODUCED BY STOCHASTIC LIFE
作者:
KevinC. W. Chen,
ReneP. Manes,
期刊:
The Engineering Economist
(Taylor Available online 1986)
卷期:
Volume 31,
issue 2
页码: 165-174
ISSN:0013-791X
年代: 1986
DOI:10.1080/00137918608902934
出版商: Taylor & Francis Group
数据来源: Taylor
摘要:
This note extends work by Young and Contreras and by Rosenthal on the present worth of cash flows under uncertain timing. In capital budgeting analysis, the use of the expected life of a project instead of the life distribution of the project biases the estimate of its expected net present value. In most situations the bias results in an overestimate of the expected net present value of the project. When the exact life distribution is unknown, the bias can be approximated by Taylor series expansion. The sensitivity of the bias to the discount rate, to cash flow patterns, and to income taxes is also investigated.
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