Magni, Carlo Alberto (2007): Project selection and equivalent CAPM-based investment criteria. Published in: Applied Financial Economics Letters , Vol. 3, No. 2 (2007): pp. 165-168.
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This article shows that the Capital Asset Pricing Model-based capital budgeting criteria proposed by Tuttle and Litzenberger (1968), Mossin (1969), Hamada (1969), Stapleton (1971), Rubinstein (1973), Bierman and Hass (1973) and Bogue and Roll (1974) are equivalent. They all state that a project is profitable if its internal rate of return is greater than the riskadjusted cost of capital, where the latter is given by the sum of the risk-free rate and a risk-premium which is a function of the systematic risk of the project, itself a function of the project cost.
|Item Type:||MPRA Paper|
|Original Title:||Project selection and equivalent CAPM-based investment criteria|
|Keywords:||Capital budgeting, investment decisions, capital asset pricing model, equivalence|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
G - Financial Economics > G1 - General Financial Markets > G10 - General
|Depositing User:||Carlo Alberto Magni|
|Date Deposited:||08. Apr 2009 14:07|
|Last Modified:||12. Feb 2013 00:42|
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