Capital Allocation in Decentralized Businesses

Authors :: Stuart M. Turnbull
Source :: Journal of Risk and Financial Management, Vol 11, Iss 4, p 82 (2018), Journal of Risk and Financial Management, Volume 11, Issue 4
Publication Year :: 2018
Publisher :: MDPI AG, 2018.
Abstract: This paper described a theory of capital allocation for decentralized businesses, taking into account the costs associated with risk capital. We derive an adjusted present value expression for making investment decisions, that incorporates the time varying profile of risk capital. We discuss the implications for business performance measurement.