ABSTRACT
This chapter provides some idea of how the subject extends from somewhat mechanical but nonetheless useful variations on the basic theme of the net present value/market value weighted average cost of capital criterion through areas of dispute on the application of basic theory to the fringes of modern ‘managerial’ theories of the firm. The reader’s familiarity with the basic concept of discounting cash flows, and with the use of discount tables, is taken for granted. Discount tables are widely available, either as appendices to texts on business finance and capital budgeting, or in compilations of mathematical, statistical and financial tables such as Z. W. Kmietowicz and Y. Yannoulis. Some writers are inclined to minimise the significance of external capital rationing, arguing that firms often deliberately limit their demands for funds to the horizontal sections of their short-run marginal cost curves, where short and long-run costs are equal.
