Expected Present Worths of Cash Flows Under Uncertain Timing

Young, Donovan; Contreras, L.

doi:10.1080/00137917508965151

Cited by 46 publications

(6 citation statements)

References 5 publications

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“…Thus, knowing the distribution of T , and provided that its moment-generating function exists, the exact formula for the expected present value can be given. Alternatively, a general approximation based on a Taylor series expansion (at T = E(T )) can be used, usually by retaining only first and second order terms, as follows (e.g., [15,39]):…”

Section: Derivation Of Present Value Formulasmentioning

confidence: 99%

Present value under uncertain asset life: an evaluation of relative error

Andor

Dülk

2013

Per. Pol. Soc. and Man. Sci.

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IntroductionIn the discounted cash flow (DCF) framework, the worth of a capital asset (henceforth simply asset) is computed by discounting its expected future cash flows at an appropriate rate (discount rate) that expresses the cost of capital. As described in related textbooks (e.g., especially [20,32,33] and also [17,18,23,31,36]), the computation can typically take one of two forms: discounting discrete cash flows (i.e., cash flows occurring at equally spaced time periods, typically years) at a discrete discount rate (i.e., the effective rate for one period) or discounting a continuous cash flow stream (i.e., cash flow is a continuous function of time) at a continuous discount rate (i.e., the rate assuming an infinitesimal period of capitalization). Mathematically, the former approach is defined by Eq. (1), and the latter is defined by Eq. (2). We assume, as usual, an identical discount rate across periods.

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Section: Derivation Of Present Value Formulasmentioning

confidence: 99%

Present value under uncertain asset life: an evaluation of relative error

Andor

Dülk

2013

Per. Pol. Soc. and Man. Sci.

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“…These two measures are computed from the data. Young and Contreras (1975) considered random lump-sum cash flows occurring at random times and uniform cash flows with random starting and cessation times. Spahr (1982) considers the uncertainty of future capital investment and reinvestment rates.…”

Section: Mean Value Of E[pw] and A Variance Of V(pw)mentioning

confidence: 99%

Investment Analyses Using Fuzzy Probability Concept / Investicijų Analizė Taikant Tikimybinę Neapibrėžtųjų Aibių Koncepciją

Kahraman

Kaya

2010

Technological and Economic Development of Economy

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Abstract. In an uncertain economic decision environment, an expert's knowledge about discounting cash flows consists of a lot of vagueness instead of randomness. Cash amounts and interest rates are usually estimated by using educated guesses based on expected values or other statistical techniques to obtain them. Fuzzy numbers can capture the difficulties in estimating these parameters. Fuzziness is one aspect of uncertainty. It is the vagueness found in the definition of a concept or the meaning of a term. Fuzzy memberships represent similarities of objects to imprecisely denned properties, while probabilities convey information about relative frequencies. In this paper, two types of investment analyses are made. First, fuzzy parameters are used in the stochastic investment analysis. Then, another investment analysis is examined by using the concept of probability of a fuzzy event.

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“…It was further developed to consider continuous cash flows with continuous discounting by Motazed [23]. The element of uncertain timing of the cash flows has been given consideration by Motazed [23], Perrakis and Henin [26] , and Young and Contreras [38]. Reismann and Rao [28] have studied a stochastic rate of inflation independent of the discounting rate.…”

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confidence: 99%