TY - JOUR
T1 - Calculating the expectation and variance of the present value for a random profit stream of uncertain duration
AU - Gerchak, Yigal
AU - Åstebro, Thomas
N1 - Funding Information:
This work was supported by the Natural Sciences and Engineering Research Council of Canada. We wish to thank the Area Editor and the referees for useful comments and references.
Funding Information:
THOMASA STEBROi s the University of Waterloo's Associate Chair of Management of Technological Change, funded by the Natural Sciences and Engineering and the Social Sciences and Humanities Research Councils of Canada, with industrial sponsorship from the Canadian Imperial Bank of Commerce. Dr. Astebro conducts research in the economics of technological change and entrepreneurship. He has recently published in IEEE Transactions of Engineering Management and The Engineering Economist. He is frequently invited to give speeches on the subject of assessing entrepreneurial ventures.
PY - 2000
Y1 - 2000
N2 - We derive the mean and variance of the random discounted sum ∑n=1Nθnχn When N is uncertain, as are the χn's. This quantity arises in applications involving random cash-flows over an uncertain number of years. One such application is R&D projects, where both the magnitude and duration of cash-flows are uncertain at the time of investment decision. Previous models have assumed cash-flow duration to be certain. We relax this assumption. We then specialize these results to geometric, mixed-geometric and Poisson distributions of the cash-flow duration.
AB - We derive the mean and variance of the random discounted sum ∑n=1Nθnχn When N is uncertain, as are the χn's. This quantity arises in applications involving random cash-flows over an uncertain number of years. One such application is R&D projects, where both the magnitude and duration of cash-flows are uncertain at the time of investment decision. Previous models have assumed cash-flow duration to be certain. We relax this assumption. We then specialize these results to geometric, mixed-geometric and Poisson distributions of the cash-flow duration.
UR - https://www.scopus.com/pages/publications/22044455794
U2 - 10.1080/00137910008967557
DO - 10.1080/00137910008967557
M3 - ???researchoutput.researchoutputtypes.contributiontojournal.article???
AN - SCOPUS:22044455794
SN - 0013-791X
VL - 45
SP - 339
EP - 349
JO - Engineering Economist
JF - Engineering Economist
IS - 4
ER -