Investments viewed as growth processes

Date

1995

Authors

Doğrusöz, H.
Karabakal, N.

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Source Title

Engineering Economist

Print ISSN

0013-791X

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Publisher

Taylor & Francis

Volume

41

Issue

1

Pages

1 - 25

Language

English

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Abstract

For modeling investment decision situations, we present a mathematical basis that views the cash flow sequences as growth processes. We first emphasize the pedagogical value of the basic model by showing that all traditionally established measures of worth (profitability) as well as the compound interest formulas of financial mathematics can actually be derived from it by simple algebraic manipulations. Then, we argue that the traditional measures fail to recognize the particularities of certain decision situations and point out the need for developing tailor made measures for each specific problem. We demonstrate, using real life examples, our approach for developing new measures and, by incorporating decision variables, practical optimization models from this mathematical basis. © 1995 Taylor & Francis Group, LLC.

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