Reversion, Timing Options, and Long-Term Decision-Making

David G. Laughton and Henry D. Jacoby

Financial Management, 1993, vol. 22, issue 3

Abstract: Discounted cash flow analysis is the most common method for evaluation of investment projects, yet practitioners worry about its shortcomings. In particular, there is concern that standard DCF comparisons may introduce bias against long-term investments. Here, we explore a possible source of such bias in the structure of the uncertainty underlying project cash flows, and the way it is incorporated into project discounting.

Date: 1993
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