Specifically, it shows that the upper and the lower barriers on the price of a risky asset at any given time are themselves bounded by the discounted upper and lower barriers, respectively, on the price at any later time. It is also shown that, as a result, in the presence of a positive riskless yield, a constant finite barrier on the price of a risky asset is inconsistent with equilibrium, with an analogous result for the lower barrier. It is shown, on the other hand, that if there is a finite upper barrier on prices, then the barrier must grow at least as fast as the interest rate. The paper stresses that these restrictions must be obeyed when modeling asset prices. The unanimity principle that underlies financial decision-making rules is ethically unacceptable and empirically invalid.
Ecological sustainability requires radically different decision rules.
Once decision-makers abandon the unrealistic and invalid assumptions of the unanimity models, no theoretically correct model is possible. Since they must still make decisions, the paper proposes combining life cycle analysis with the traditional net present value rule, as a practical alternative that should move toward sustainability. In this paper we study management's perception of and motivation for a Leveraged Buyout. We posit and formally test three hypotheses. Our finding are in contrast in general to conclusions drawn from market data based studies.