Present Value Models and Investment Analysis | 
| Authors: Lindon J. Robison, Peter J. Barry
Publisher: Michigan State University Press
Category: Book
List Price: $55.00
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Avg. Customer Rating:  2 reviews
Sales Rank: 3179023
Media: Textbook Binding
Number Of Items: 1
Pages: 661
Shipping Weight (lbs): 3
Dimensions (in): 8.7 x 7 x 1.7
ISBN: 0870134884
Dewey Decimal Number: 332
EAN: 9780870134883
ASIN: 0870134884
Publication Date: May 1, 1998
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| Customer Reviews:
 Mathematically, the textbook should be fairly accessible to May 17, 1999
2 out of 3 found this review helpful
In attempting to place the textbook reviewed into the literature, it is difficult to separate my comments on the book from the courses I have offered. A compounding factor to this difficulty is the text's specificity toward investment analysis. I have not taught a course specialized toward investment analysis. Instead, I typically include investment analysis within a comprehensive survey of agricultural finance. As such, the Robison and Barry text could not be used as the sole textbook. However, the textbook does compare favorably with Bussey's "The Economic Analysis of Industrial Projects" which I have used as a supplemental text in a master's level finance course. The advantage of Robison and Barry over Bussey is their focus on agriculture and agricultural issues. In addition, Robison and Barry provide similar treatments for comparisons of projects with unequal lives and reinvestment assumptions in internal rate of return formulations, although Bussey's coverage is somewhat more in depth in each case. Mathematically, the textbook should be fairly accessible to students with modest backgrounds in calculus. Specifically, instead of structured proofs, Robison and Barry lead through proofs on geometric series in a rather low-key example format. In addition, the text focuses more on application than on proof. Thus, any mathematical proofs, while useful for understanding the specific point of inference, should not compromise the usefulness of the reference. Taking these factors into account, I can see the reference in an advanced undergraduate/master's level course in agricultural finance in addition to another reference. Specifically, I would consider using parts 1-3 to provide an overview of investment analysis. Given this background, individual chapters from parts 4 and 5 could be used as time allows. In particular, I would recommend Chapters 13, 14, 18, and 19 at the advanced undergraduate level, bringing in Chapters 21 and 22 at the master's level. While I found the text to be an excellent overview, I do have two reservations. The first involves the discussion of the choice of discount rate for the present value analysis. By focusing on the defender/challenger relationship, Robison and Barry tend to support an investment-specific discount rate. In other words, the appropriate discount rate is internal rate of return for the defender which must be sacrificed to make funds available for the acquisition of the challenger. If the challenger involves acquiring a loan, the discount rate is then the price of the loan together with any transaction cost involved in getting the loan. While this approach is consistent with the firm level focus of the text, it does lead to the unfortunate result that two firms may have different values for the same investment depending on the financial resources available to each firm. In some sense, evaluating an investment in this manner enmeshes gains to financing with the value of the investment. Of course, one could argue that it is the enmeshing which is important for analyzing options such as lease/purchase decisions. The second shortcoming of the textbook is the paucity of discussion regarding the term structure of interest rates.
 Breaks away from a half century of one-sided overemphasis. February 16, 1999
4 out of 4 found this review helpful
The authors successfully break away from five decades of overemphasis on one measure of discounted cash flow (Net Present Value or NPV) at the expense of the other (Internal Rate of Return or IRR). They show there is room for both. They successfully demonstrate how present value models, using both discounted cash flow measures can solve a wider range of problems than previously attempted. Doing so was an act of academic courage that netted them at least one unfavorable book review: '"(The authors) contend and demonstrate, unlike other texts on capital budgeting, when several independent projects are being simultaneously considered that the internal-rate-of-return (IRR) and net present value (NPV) criteria "...will always provide consistent rankings unless the homogenous measures principle is violated" (pp. 66-70, 120-23). However, one must question if forging this IRR - NPV ranking equivalency merits the reader's study."' Consistent ranking absolutely merits study--and understanding by readers--and by reviewers--and by other authors. The essential equivalence of the two measures is, in large part, what makes present value modeling so attractive. You can do a lot with both that was impractical with either alone. Rather than use the book for a course, build a course around it as the authors suggest.
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