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Abstract

This article demonstrates that the usefulness of time-state contingent investment evaluation models need not be constrained by limited time-state contingent markets. Dual solutions to stochastic programs can be used to obtain firm-specific values for risky investments while allowing linear dependence between initial values and later time-state contingent income-technical coefficients. The model could be useful when the exogenous a priori determination of appropriate (and project-specific) risk-adjusted discount rates and/or certainty equivalents is difficult or when the cash equivalents of noncash investment effects are difficult to estimate.

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