Uncertainty and its Effect on Capital Investment Analysis

Martin B. Solomon, Jr.
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Martin B. Solomon, Jr.: University of Kentucky, Lexington

Management Science, 1966, vol. 12, issue 8, B334-B339

Abstract: When uncertainty concerning costs, revenues, and project life exists, classical measures of capital investment return are limited in value. Sensitivity analysis indicates that relatively small over estimates and under estimates create relatively large errors in the discounted rate of return for different types of return schedules. Perhaps, then, businessmen are justified in seeking other methods of project evaluation.

Date: 1966
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