The Evaluation of Risky Investments with Random Timing of Cash Returns

Stylianos Perrakis () and Claude Henin
Additional contact information
Claude Henin: University of Ottawa

Management Science, 1974, vol. 21, issue 1, 79-86

Abstract: This paper provides a computational technique for the evaluation of the distribution of the net present value (NPV) of an investment, in which the cash inflows occur at random time points, as in the case of venture capital. The initial cash outlay is deterministic and the magnitudes of the cash inflows are nonnegative, random variables with known distributions. The lengths of the intervals between successive cash inflows are independently distributed and independent of the magnitude of the inflows. The Laplace transforms and the first two moments of the distribution are computed for both independent and perfectly correlated inflows. It is shown that the use of constant time intervals when the timing of the inflows is random underestimates the variance of the distribution of the NPV.

Date: 1974
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.21.1.79 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:21:y:1974:i:1:p:79-86

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().