IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v19y1991i4p305-316.html
   My bibliography  Save this article

Application of the calculus of variations to financing alternatives

Author

Listed:
  • Grubbström, RW
  • Ashcroft, SH

Abstract

The problem considered is to choose from a finite set of inter-related investment and financing alternatives and also levels of consumption/work over time in order to maximise a utility functional. Each investment and financing option is characterised by its cash flow over time. An inter-temporal budget requirement operates continuously. Application of Calculus of Variations leads to consideration of the Euler-Lagrange equations combined with Kulm-Tucker conditions. It is shown that the solution (also when there are logical dependencies present) requires the maximisation of a Generalised Net Present Wealth measure in which the discount factor is formed from an integral of the Lagrangean multiplier function.

Suggested Citation

  • Grubbström, RW & Ashcroft, SH, 1991. "Application of the calculus of variations to financing alternatives," Omega, Elsevier, vol. 19(4), pages 305-316.
    • Handle: RePEc:eee:jomega:v:19:y:1991:i:4:p:305-316
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0305-0483(91)90047-W
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Borgonovo, E. & Peccati, L., 2006. "The importance of assumptions in investment evaluation," International Journal of Production Economics, Elsevier, vol. 101(2), pages 298-311, June.
    2. Molinder, Anders, 1995. "Application of calculus of variations to a continuous time aggregate production model," International Journal of Production Economics, Elsevier, vol. 41(1-3), pages 273-280, October.
    3. Borgonovo, E. & Peccati, L., 2007. "Global sensitivity analysis in inventory management," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 302-313, July.
    4. Marchioni, Andrea & Magni, Carlo Alberto, 2018. "Investment decisions and sensitivity analysis: NPV-consistency of rates of return," European Journal of Operational Research, Elsevier, vol. 268(1), pages 361-372.
    5. Cigola, Margherita & Peccati, Lorenzo, 2005. "On the comparison between the APV and the NPV computed via the WACC," European Journal of Operational Research, Elsevier, vol. 161(2), pages 377-385, March.
    6. Luciano, Elisa & Peccati, Lorenzo, 1999. "Capital structure and inventory management:: The temporary sale price problem," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 169-178, March.
    7. Luciano, Elisa & Peccati, Lorenzo, 2001. "Cycles optimization: The equivalent annuity and the NPV approaches," International Journal of Production Economics, Elsevier, vol. 69(1), pages 65-83, January.
    8. Borgonovo, E., 2008. "Differential importance and comparative statics: An application to inventory management," International Journal of Production Economics, Elsevier, vol. 111(1), pages 170-179, January.
    9. Magni, Carlo Alberto & Marchioni, Andrea & Baschieri, Davide, 2023. "The Attribution Matrix and the joint use of Finite Change Sensitivity Index and Residual Income for value-based performance measurement," European Journal of Operational Research, Elsevier, vol. 306(2), pages 872-892.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:19:y:1991:i:4:p:305-316. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.