The Discount Rate Problem in Capital Rationing Situations: Reply

Peter Lusztig and Bernhard Schwab

Journal of Financial and Quantitative Analysis, 1970, vol. 5, issue 2, 261-261

Abstract: In our earlier note, we drew attention to the problem of interdependency between the opportunity cost used as a discount rate in determining the net present values of the objective function and the optimal solution of a linear program. In expanding on our article, Lockett and Tompkins (L and T) rightly point to the need for an appropriate definition of opportunity costs.

Date: 1970
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