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An Application of the Box‐Jenkins Methodology to Capital Budgeting

Paul Fallone (Department of Mathematics, University of Connecticut Storrs, Connecticut 06268)
Carmelo Giaccotto (Department of Finance, School of Business Administration, University of Connecticut Storrs, Connecticut 06268 January 1990)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 February 1991

Abstract

The authors derive the probability distribution of the net present value of a project under the quite general assumption that the cash flows follow either an autoregressive moving average process or an integrated autoregressive process. Examples are presented which serve to both illustrate the application of the results as well as to underscore how to use utility functions for decision making, how to determine a project's Internal Rate of Return, and the dynamic resolution of uncertainty.

Citation

Fallone, P. and Giaccotto, C. (1991), "An Application of the Box‐Jenkins Methodology to Capital Budgeting", Managerial Finance, Vol. 17 No. 2/3, pp. 51-69. https://doi.org/10.1108/eb013670

Publisher

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MCB UP Ltd

Copyright © 1991, MCB UP Limited