Research Reports from the Department of Operations
Document Type
Report
Publication Date
8-1-1970
Abstract
This paper addresses challenges in applying discounted cash flow analysis as presented in standard texts on Engineering Economy, Capital Allocation Theory, Finance, Managerial Economics, and Economic Analysis. While traditional research texts assume deterministic values for independent variables and parameters, real-world applications often face uncertainty in determining these values. The paper proposes stochastic formulations to account for such uncertainty, detailing equations for various combinations and permutations of distributions. The findings aim to bridge the gap between theoretical models and the complexities of real-world financial decision-making.
Keywords
Stochastic processes, Operations research, Discounted cash flow, Distribution (Probability theory)
Publication Title
Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 187
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Reisman, Arnold and Rao, Arza K., "Stochastic Variations of Commonly Used Discounted Cash Flow Formulae" (1970). Research Reports from the Department of Operations. 562.
https://commons.case.edu/wsom-ops-reports/562