Journal of Financial and Quantitative Analysis Vol. 13 No. 5 1978
The Economic Life of an Investment and the Appropriate Discount Rate
Abstract
Recently, the appropriateness of the weighted average cost of capital for making decisions on capital structure and the selection of projects has been seriously questioned. Arditti [1] showed that when project lives were finite, the weighted average cost of capital was not appropriate for valuing the firm. Beranek [2] demonstrates that when the objective is shareholder wealth maximization, the appropriate discount rate for capital budgeting decisions for finite lived projects n > 1 is not the traditional weighted average cost of capital.
- DOI
- 10.2307/2330630
- Volume
- 13
- Issue
- 5
- Pages
- 831
- Sources
- crossref openalex