AnMod and DecSim: Two Models of Sequences of Capital Rationing Decisions and their Use in Evaluating Capital Budgeting Policies

摘要

A relatively simple analytic model, called AnMod, and a sophisticated Monte Carlo simulation model, called DecSim, of sequences of capital rationing investment decisions are described briefly. AnMod is an effective predictor of the expected performance of various capital rationing selection procedures and of the potential effects of capital budgeting policies considered by entities in realistic capital budgeting decision environments. Numerical examples of its use are presented. The major results of over 20 years of research using DecSim, its two predecessors and related simulation models is summarized. That research includes investigations of the potential affect on an entity's equity capital growth rate of: incomplete information, uncertainty, risk, choice of a cutoff rate, debt policy, and several investment decision procedures. The paper concludes with a summary of the practical insights gained from the use of AnMod and DecSim and some recommendations for future research.