AN EVALUATION OF INVESTMENT CRITERIA

THE FREQUENTLY PROPOSED INVESTMENT CRITERIA FOR MAKING OPTIMAL INVESTMENT DECISIONS, WHICH ARE THE PRESENT VALUE AND INTERNAL RATE OF RETURN RULES, ARE EXAMINED UNDER CONDITIONS OF COMPLETE CAPITAL RATIONING. AN IMPORTANT CONSEQUENCE OF THIS CONTEXT IS THAT MARKET RATES OF INTEREST CANNOT BE USED AS DISCOUNT FACTORS. A CONTRIBUTION OF THIS STUDY IS A SYNTHESIS OF TWO INDEPENDENT ANALYSES OF WHAT TO DO UNDER SUCH CIRCUMSTANCES. THE PROBLEM IS RESOLVED BY SHIFTING THE OBJECTIVE OF INVESTMENT FROM MAXIMIZATION OF A DISCOUNTED SUM OF DOLLAR RETURNS TO THE MAXIMIZATION OF UTILITY. THIS RESOLUTION IS MODELED ON IRVING FISHER'S THEORY OF INVESTMENT AND EMPHASIZES THE NECESSITY OF UTILITY MEASURES ON THE OBJECTS OF INVESTMENT. ANOTHER UNIQUE FEATURE OF THE PAPER IS THE APPLICATION OF THE ANALYTICAL RESULTS TO AN INVESTMENT PROBLEM INVOLVING LOGISTIC SUPPORT OF THE POLARIS WEAPON SYSTEM. THIS APPLICATION DEMOSTRATES THE USE OF UTILITY MEASURES OR MILITARY ESSENTIALITY AND THE RELATIONSHIP TO THE RATE OF RETURN CONCEPT IN MILITARY PLANNING. /AUTHOR/

  • Supplemental Notes:
    • Contract N00014-67-A-0214, TASK 01, PROJ NR 047 001
  • Corporate Authors:

    Office of Naval Research

    Department of the Navy, 800 North Quincy Street
    Arlington, VA  United States  22217
  • Authors:
    • Sutton, S S
  • Publication Date: 1968-6-17

Subject/Index Terms

Filing Info

  • Accession Number: 00201765
  • Record Type: Publication
  • Source Agency: Traffic Systems Reviews & Abstracts
  • Files: TRIS
  • Created Date: Jun 1 1970 12:00AM