A Note on the Reinvestment Rate in Capital Budgeting Analysis

Abstract

本 硏究에서는 資本豫算에서 再投資利益率이 前提로 하는 올바른 假定은 限界資本費用이 아니라 平均資本收益率이라는 論理르 전개하였다.

相互排他的인 投資率의 經濟性分析에서 純現價法과 內部收益率法이 投資優先順位에서 不一致하는 근원으로서 再投資利益率의 暗示的 假定을 考察하였다.

어떤 市場形態를 막론하고 限界利潤이 존재하는 限 投資가 계속되고 限界收入과 限界費用이 일치하는 점에서 利潤極大點이 형성된다는 企業의 利潤極大化한 行動準則에 의거 新規投資의 收益率은 항상 投資額에 대한 負의 函數로 나타내므로 再投資의 收益率은 新規投資의 平均資本收益率과 일치하여야 한다는 논리가 성립될 수 있다. 또한 이 論理는 投資決定基準으로서 純現價法과 內部收益率法의 制限的 妥當性을 支持하여 준다.

The purpose of this paper is to demonstrate that the correct assumption for reinvestiment rate where financial capital is freely available at any pint in time is not the firm's marginal cost of capital but the average rate of return on new investment.

If the profit maximization firm pushes investment to the point where the marginal cost of capital is equal to the marginal rate of return, then the optimal capital budget will be made. Since the rates of return(IRR&ARR) are always assumed to be negatively downward sloping and there is also ans average internal rate of return schedule on new investment, the rate of return on reinvestment from intermediate cash flow must be equal to the average rate of return on new investment, not the marginal cost of capital.

It is also demonstrated that the internal rate of return method is superior to the net present value method if the marginal cost of capital lies to the left of Fisher's rate, while the net present value method will give the most valid ranking of mutually exclusive proposals if the average rate of return lies to the left of Fisher's rate.

The purpose of this paper is to demonstrate that the correct assumption for reinvestiment rate where financial capital is freely available at any pint in time is not the firm's marginal cost of capital but the average rate of return on new investment.

If the profit maximization firm pushes investment to the point where the marginal cost of capital is equal to the marginal rate of return, then the optimal capital budget will be made. Since the rates of return(IRR&ARR) are always assumed to be negatively downward sloping and there is also ans average internal rate of return schedule on new investment, the rate of return on reinvestment from intermediate cash flow must be equal to the average rate of return on new investment, not the marginal cost of capital.

It is also demonstrated that the internal rate of return method is superior to the net present value method if the marginal cost of capital lies to the left of Fisher's rate, while the net present value method will give the most valid ranking of mutually exclusive proposals if the average rate of return lies to the left of Fisher's rate.