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Use of Probabilistic Cash Flows in Analyzing Investments Under Conditions of Risk and Uncertainty
Open accessAbstract
Managers of business firms, large or small, farm or nonfarm, must make investment decisions under conditions of risk and uncertainty. However, in evaluating investments, the assumption of perfect knowledge has often been used to simplify the analysis. For example, an estimate of average annual net returns is frequently discounted into perpetuity to evaluate a real estate investment alternative. Capital budgeting literature suggests a number of approaches to evaluating alternative investments. However, use of concepts such as the payback period, average rate of return, internal rate of return and net present value embodies the assumption of perfect knowledge.
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Research works printed but not linked: 27
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Cited by
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De Leijster, V., Verburg, R. W., Santos, M. J., Wassen, M. J., Martínez-Mena, M., de Vente, J., & Verweij, P. A. (2020) · Agricultural Systems · doi:10.1016/j.agsy.2020.102878 · Cited by 52
Metadata
- Authors
- Richardson, J. W., & Mapp, H. P.
- Affiliations
- Oklahoma State University (US)
- Venue
- Journal of Agricultural and Applied Economics
- Publisher
- Cambridge University Press (CUP)
- Published
- 1976-12
- Volume
- 8
- Issue
- 2
- Pages
- 19-24
- ISSN
- 0081-3052 (ISSN-L)
- 1074-0708
- 2056-7405
- OpenAlex
- W2130423475
- Cited by
- 50
- References
- 0
- Citations by year
- 2026: 1 · 2025: 1 · 2023: 2 · 2022: 3 · 2020: 1 · 2019: 2 · 2017: 3 · 2016: 4 · 2015: 4 · 2014: 7 · 2013: 3 · 2012: 3
- FWCI
- 1.08
- Type
- journal article
- Language
- en
- Open access
- green
- ageconsearch.umn.edu
- Licence
- Locations
- Journal of Agricultural and Applied Economics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- AgEcon Search (University of Minnesota, USA) (submittedVersion, cc-by-nc-nd)
- AgEcon Search (University of Minnesota, USA)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Capital Investment and Risk Analysis
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Agricultural economics and policies
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Keywords
- capital budgeting, net present value, internal rate of return, payback period, average rate of return, real estate investment, farm investment decisions
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- Richardson, J. W., & Mapp, H. P. (1976). Use of Probabilistic Cash Flows in Analyzing Investments Under Conditions of Risk and Uncertainty. Journal of Agricultural and Applied Economics. https://doi.org/10.1017/s0081305200013182
