Managerial and Engineering Economics,by Arnold Reisman |
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Authors: | J Morley English |
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Institution: | University of California at Los Angeles |
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Abstract: | In his recent paper (“Interest Rate Independent Present Value Ranking,” The Engineering Economist, Vol. 34, No. 2, 1989), W. H. Jean discusses the concept of the “time dominance,” developed for the interest rate independent ranking of mutually exclusive projects. He derives a set of conditions identifying the time dominance for the continuous model of time and value representation, and applies these conditions to cash flow series defined in terms of the discrete model. In the current contribution, the genuine time dominance conditions for the discrete model of time and value representation are derived, and it is shown that they are not only much more simple to handle than those presented by Jean, but are also a part of an already existing approach published earlier in this journal. Since Jean's conditions are valid only for the positive values of the interest rate, complementary conditions applicable for the negative interest rates, for both the discrete and continuous models, are also derived. |
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