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Duration and Risk Assessments in Capital Budgeting.

Edward Blocher¹; Clyde Stickney²

¹ Assistant Professor of Accounting, University of North Carolina, Chapel Hill. 1 · ² Coopers and Lybrand Visiting Associate Professor of Accounting, Dartmouth College. 2

Abstract ABSTRACT: This paper brings to the accounting literature the results of recent research from other disciplines on a measure called duration and examines its potential usefulness in capital budgeting decisions. Duration is defined as the number of periods which elapse before the average present value dollar is received from a stream of cash flows. In this paper, the authors define duration and describe its major attributes. Its potential for assessing the risk of changes in required rates of return and the risk of illiquidity are then explored in a capital budgeting setting.

DOI

10.2308/tar-4490155

Volume

54 (1)

Pages

186-194

Language

en

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