Discounted Cash Flow with Explicit Reinvestment Rates: Tutorial and Extension

William R McDaniel, Daniel E McCarty and Kenneth A Jessell

The Financial Review, 1988, vol. 23, issue 3, 369-85

Abstract: This article discusses and critiques yield-based capital budgeting techniques that have arisen over the past thirty years. Some have theoretical inconsistencies, while some work well only for certain kinds of problems. A new method, the marginal return on invested capital, is presented. The method's application is general; it gives accept/reject signals and rankings consistent with the net present va lue method. Copyright 1988 by MIT Press.

Date: 1988
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