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Target Rates of Return and Corporate Asset and Liability Structure Under Uncertainty

Published online by Cambridge University Press:  19 October 2009

R. H. Litzenberger  and
O. M. Joy
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Extract

This paper examines the multiperiod capital allocation problem of a corporate division that is subject to ex post financial scrutiny by the parent corporation based upon meeting a specified target rate of return on investment. Using a zero-order decision rule, a deterministic equivalent linear programming model is developed to solve for the division's optimal mix of productive assets and the maturity structure of its debt.

Type
Business Finance
Information
Journal of Financial and Quantitative Analysis , Volume 6 , Issue 2 , March 1971 , pp. 675 - 686
Copyright
Copyright © School of Business Administration, University of Washington 1971

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