Value-neutral tradeoffs between failure risk and growth
Sherrill Shaffer ()
Applied Financial Economics Letters, 2008, vol. 4, issue 3, 217-219
Business choices typically entail tradeoffs between potential growth rates and the risk of failure. This note applies recent results from the theoretical valuation literature to characterize, as a benchmark, the terms of that tradeoff sufficient to leave the expected value of discounted cash flows unchanged. The central result indicates that risk-neutral investors could accept sizeable increases in risk in exchange for modest improvements in expected growth rates. The benchmark result can be used to rank projects in terms of their impact on the value of the firm's equity.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:taf:apfelt:v:4:y:2008:i:3:p:217-219
Ordering information: This journal article can be ordered from
Access Statistics for this article
Applied Financial Economics Letters is currently edited by Mark Taylor
More articles in Applied Financial Economics Letters from Taylor and Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().