Financial Maturity: A Theoretical Review
DOI link for Financial Maturity: A Theoretical Review
Financial Maturity: A Theoretical Review book
This chapter presents an algebraic and graphical analysis of several financial maturity concepts with the objective of clarifying the assumptions of each proposed model. To illustrate most of the financial maturity models presented, costs and revenues are plotted against an arithmetic time axis and a logarithmic dollar axis. Assuming this objective, financial maturity is defined to occur when a stand's anticipated future value growth will not increase the firm's present net worth. Boulding's maximum internal rate of return model assumes that access to all external investment opportunities is blocked, and like the incomplete financial maturity model used by Duerr, et a/., it does not consider inputs other than growing stock, particularly the input of land. The foregoing comparison of the internal rate of return and present net worth solutions illustrates the argument that the various financial maturity models may be distinguished according to implicit or explicit assumptions regarding accessibility of factor markets on input fixities.