On the present-worth moments of serially correlated cash flows

On the present-worth moments of serially correlated cash flows

0.00 Avg rating0 Votes
Article ID: iaor1991360
Country: Netherlands
Volume: 16
Issue: 4
Start Page Number: 281
End Page Number: 289
Publication Date: Jul 1989
Journal: Engineering Costs and Production Economics
Authors: , ,
Abstract:

The net present value (NPV) of a serially correlated cash-flow profile is examined. Given the expert estimates of end-of-period cash-flows, which are assumed to be beta variates, a methodology is developed to determine the first four moments of the profile’s NPV. The authors first determine the moments of the cash-flows, whereby the NPV expectation results readily. Then a correlative model based on time-series analysis is assumed in order to examine the cash-flow dependency; this is required for the determination of higher moments. Subsequently, it is shown that the higher moments of the NPV can be determined from the moments of period cash-flows and the time-series parameters. Although the beta-distributed assumption is used to illustrate the methodology, it is not a requirement in this analysis. Indeed, the approach presented in this paper is applicable to a finite cash-flow profile with arbitrarily distributed cash flows, as long as their individual moments can be determined.

Reviews

Required fields are marked *. Your email address will not be published.