BUSINESS INVESTMENT THEORY AND PRACTICE IN THE UNITED STATES

Abstract

In an abstract sense, the objective of business investment theory, as will be discussed in this study, is to maximize the wealth of the person or group supplying the capital. Wealth-maximization has also been called net present wealth maximization" and has been defined as the difference between gross present wealth and the amount of capital investment required to achieve the benefits being discussed. Gross present wealth consists of the sum of future earnings less economic depreciation, interest and taxes discounted by a factor which measures the uncertainty of the estimates.

This is a more precise concept than profit maximization because it relates capital investments that occur in the present with uncertain profits that will occur in the future.