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Capital budgeting with continuous cash flows: An application of calculus to managerial accounting
Affiliation:1. Department of Mathematics, East China Normal University, Shanghai 200241, China;2. Department of Mathematics, University of South Carolina, Columbia, South Carolina 29208, USA;3. Institute of Soft Matter Mechanics, College of Mechanics and Materials, Hohai University, Nanjing, Jiangsu 210098, China;4. Department of Applied Mathematics and Statistics, Johns Hopkins University, Baltimore, MD 21218, USA;1. School of Economics, Hunan Agricultural University, Changsha, 410128, China;2. College of Business, Hunan University of Technology, Zhuzhou, 412007, China;1. State Key Laboratory of Mechanics and Control of Mechanical Structures, Nanjing University of Aeronautics and Astronautics, 29 Yudao Street, Nanjing 210016, China;2. Center for Composite Materials and Structures, Harbin Institute of Technology, Harbin 150080, China;3. Jiangsu Key Laboratory of Advanced Structural Materials and Application Technology, School of Materials Science and Engineering, Nanjing Institute of Technology, Nanjing 211167, China
Abstract:Project valuation in managerial accounting often involves discounting approximately continuous cash flows. Calculus is the natural mathematical tool for dealing with continuous flows and is a required part of the business curriculum in most major universities. Typical managerial accounting textbooks provide students with little opportunity to use calculus in solving accounting problems. Discounting continuous flows is a natural medium for introducing calculus into managerial accounting courses. This article illustrates the application of calculus to capital budgeting. Explicit but simplified consideration of inflation and taxation leads to interesting conclusions while maintaining enough simplicity for upper-division managerial accounting presentation
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