Evaluating time streams of income |
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Authors: | David E Bell |
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Institution: | International Institute for Applied Systems Analysis, Laxenburg, Austria |
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Abstract: | When a decision maker considers possible returns from a business project or investment, he often faces the problem that these returns are not all received at the same time, and thus he must make some adjustments to take account of his time preference for money. After a review of discounting, a utility theory approach is made by developing a two-attribute utility function u(x, t) which represents the desirability of an income of x at a time t in the future. Assumptions to simplify the assessment of this function are considered. Then u(x, t) is used to form a criterion for evaluating infinite time streams of income. |
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