Abstract In recent years a number of articles pertaining to the subject of capital budgeting have appeared. Some of these have been more or less exclusively devoted to the demand aspect of the problem, that is, they have dealt with methods of evaluating the attractiveness of proposed investments in new assets. Others have been primarily concerned with the supply question of ascertaining a corporation's cost of capital. Thus, the general capital budgeting problem is often treated as if it were composed of two distinct and rather independent segments. It would be unfortunate, however, if specialization led to a parochial view of the constituent elements of the capital budgeting process, since it is the interaction of supply and demand that must be considered in order to arrive at an optimal budget. The investment decision is dependent on financing information, namely, the market rate of interest and the amount of borrowing or lending that should be done depends on where the consumer stops on the productive opportunity curve.
David V. Heebink (Wed,) studied this question.