Jump to ContentJump to Main Navigation
The Economics of Business ValuationTowards a Value Functional Approach$
Users without a subscription are not able to see the full content.

Patrick Anderson

Print publication date: 2013

Print ISBN-13: 9780804758307

Published to Stanford Scholarship Online: September 2013

DOI: 10.11126/stanford/9780804758307.001.0001

Show Summary Details
Page of

PRINTED FROM STANFORD SCHOLARSHIP ONLINE (www.stanford.universitypressscholarship.com). (c) Copyright Stanford University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in SSO for personal use.date: 29 June 2022

The Failure of the Neoclassical Investment Rule

The Failure of the Neoclassical Investment Rule

(p.23) 3 The Failure of the Neoclassical Investment Rule
The Economics of Business Valuation

Patrick L. Anderson

Stanford University Press

This chapter presents telling evidence that the value of a firm is not the net present value of its expected profits. This is a provocative statement, and deserves careful support: the notion that the value of investments in firms is the expected net present value of their earnings is a pillar of Finance. The author summarizes the intellectual history of this notion, and then presents six major failings of the “NPV rule,” in particular, that decision-makers often don’t follow this rule.

Keywords:   Net Present Value, NPV rule, neoclassical investment rule, Modigliani-Miller, real options, entrepreneurs, Finance

Stanford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us.