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Determining Depreciations As A Two-Stage Problem

Author

Listed:
  • Rüdiger Eichin
  • Christoph Schneeweiss

Abstract

Within the framework of a hierarchical model, the paper determines depreciation rates for exhaustible facilities. It hierarchically integrates an investment model with a production model combining the tactical investment calculus with the operational cost accounting level. Using the anticipation procedure of hierarchical planning, depreciation rates, as part of the contribution margin of the operational production model, influence the anticipated cash flow of the net present value (NPV) criterion of the investment level. Hence, using a two-stage procedure depreciation rates are determined as NPV-optimal cost parameters. The paper fully accounts for a stochastic environment and compares numerically the two stage cost evaluation with linear depreciations.

Suggested Citation

  • Rüdiger Eichin & Christoph Schneeweiss, 2001. "Determining Depreciations As A Two-Stage Problem," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 53(2), pages 66-81, April.
    • Handle: RePEc:sbr:abstra:v:53:y:2001:i:2:p:66-81
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    More about this item

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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