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Date: | Fri Mar 31 17:19:13 2006 |
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----------------- HES POSTING -----------------
Great summary provided by Avi Cohen.
Was Boulding setting forth the concept of internal rate of return (IRR)
in the excerpt below -- i.e., was it his concept -- or simply utilizing it in
explaining his model?
>In the second, Boulding (1935), extends the profit-maximizing
>condition of marginal revenue equals marginal cost to incorporate the
>element of time as an explicit variable of the problem. Assuming
>perfect foresight, Boulding examines the complete history (revenues,
>costs, net revenues) of a single investment, from the day of its
>inception to the day of its final liquidation. Given a physical
>production function which includes the period of production as a
>variable, the investor maximizes the internal rate of return over the life
>of the investment by choosing the optimal rates of input and period of
>production. The maximum rate of return is the rate of interest which
>makes, at any date, the present values of revenues (outputs) equal to
>the present value of costs (inputs).
Scott Cullen
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