Abstract This article focuses on investment decisions. Economists pontificate with the calm assurance of authority. The objective of the corporation is stated flatly to be maximization of the present value of the firm's common shares, although that depends upon market reaction, which is largely beyond the control of the firm. Or, alternatively and with different effect on decisions, the objective is asserted to be maximized present worth of future cash flows, discounted at a stipulated and unique "interest" rate on which economists insist and disagree. Or, is to maximize long-run capital. Accountants feel that the diversity of practice allowed defies meaningful comparisons, and indeed that alternative techniques are essential. Over-whelming success of the free-enterprise system stems from its utilization of financial incentives to the benefit of all. Optimized return automatically connotes minimized pricing of goods and services. Because the interaction is automatic, it is poorly appreciated. There are two ways to increase profitability. One is to lower costs, costs of both production and of capital. The other is to increase the prices charged for goods and services produced, regardless of the costs of production and of capital.
Paul H. Jeynes (Fri,) studied this question.