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Investment appraisal under conditions of continuous and discrete cash flows and discounting

Investment appraisal under conditions of continuous and discrete cash flows and discounting Purpose – This research furthers scholarly discourse which discusses the most effective way(s) to calculate investment returns under conditions of continuous and/or discrete cash flows with continuous and/or discrete discounting. Design/methodology/approach – Discusses Pogue's work on the methods for investment analysis. Findings – Pogue's article of discrete versus continuous calculation of investment returns discusses limitations of the traditional assumption that cash flows in investment appraisal occur at the end of each period and points to a more realistic assumption that cash flows occur on a continuous basis. Pogue then proposes a formula for managers to use when calculating investment returns. Finds that Pogue's suggested method of calculation is neither supported by prior literature nor sound in its implications. Originality/value – Provides further analysis of discrete and continuous discounting models in investment decisions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Investment appraisal under conditions of continuous and discrete cash flows and discounting

Managerial Auditing Journal , Volume 20 (1): 6 – Jan 1, 2005

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Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686900510570678
Publisher site
See Article on Publisher Site

Abstract

Purpose – This research furthers scholarly discourse which discusses the most effective way(s) to calculate investment returns under conditions of continuous and/or discrete cash flows with continuous and/or discrete discounting. Design/methodology/approach – Discusses Pogue's work on the methods for investment analysis. Findings – Pogue's article of discrete versus continuous calculation of investment returns discusses limitations of the traditional assumption that cash flows in investment appraisal occur at the end of each period and points to a more realistic assumption that cash flows occur on a continuous basis. Pogue then proposes a formula for managers to use when calculating investment returns. Finds that Pogue's suggested method of calculation is neither supported by prior literature nor sound in its implications. Originality/value – Provides further analysis of discrete and continuous discounting models in investment decisions.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jan 1, 2005

Keywords: Investment appraisal; Cash flow; Discounted cash flow

References

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