IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v13y1966i2pb84-b92.html
   My bibliography  Save this article

Capital-Budgeting Decisions Involving Combinations of Risky Investments

Author

Listed:
  • James Van Horne

    (Graduate School of Business, Stanford University)

Abstract

In this paper, a method is proposed for evaluating combinations of investments when the cash flows are not known with certainty. Various probability concepts are employed; and combinations are evaluated according to their incremental contribution of expected net-present value and variance to the firm as a whole. It is shown that existing investment projects must be considered if the total risk of a particular combination of investment proposals is to be evaluated realistically. Through diversification of investments, a firm is able to obtain the most desirable combination of expected net-present value and risk.

Suggested Citation

  • James Van Horne, 1966. "Capital-Budgeting Decisions Involving Combinations of Risky Investments," Management Science, INFORMS, vol. 13(2), pages 84-92, October.
    • Handle: RePEc:inm:ormnsc:v:13:y:1966:i:2:p:b84-b92
    DOI: 10.1287/mnsc.13.2.B84
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.13.2.B84
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.13.2.B84?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

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


    Cited by:

    1. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Capital Structure Theory: Past, Present, Future," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 9-50, Springer.
    2. Marcin Dec, 2021. "From point through density valuation to individual risk assessment in the discounted cash flows method," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5621-5635, October.
    3. Zixuan Zhang & Michail Chronopoulos & Dimitrina S. Dimitrova & Ioannis Kyriakou, 2024. "Risk assessment and optimal scheduling of serial projects," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 46(3), pages 709-736, September.
    4. Marcin Dec, 2019. "From point through density valuation to individual risk assessment in the discounted cash flows method," GRAPE Working Papers 35, GRAPE Group for Research in Applied Economics.
    5. Creemers, Stefan, 2018. "Moments and distribution of the net present value of a serial project," European Journal of Operational Research, Elsevier, vol. 267(3), pages 835-848.
    6. Borgonovo, Emanuele & Gatti, Stefano, 2013. "Risk analysis with contractual default. Does covenant breach matter?," European Journal of Operational Research, Elsevier, vol. 230(2), pages 431-443.
    7. Lefley, Frank, 1997. "Approaches to risk and uncertainty in the appraisal of new technology capital projects," International Journal of Production Economics, Elsevier, vol. 53(1), pages 21-33, November.

    More about this item

    Statistics

    Access and download statistics

    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:inm:ormnsc:v:13:y:1966:i:2:p:b84-b92. 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: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    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.