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Capital Equipment Analysis: The Required Rate of Profit

Author

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  • Myron J. Gordon

    (School of Industrial Management, Massachusetts Institute of Technology)

  • Eli Shapiro

    (School of Industrial Management, Massachusetts Institute of Technology)

Abstract

The interest in capital equipment analysis that has been evident in the business literature of the past five years is the product of numerous social, economic, and business developments of the postwar period. No conclusive listing of these developments can be attempted here. However, four should be mentioned which are of particular importance in this search for a more systematic method for discovering, evaluating, and selecting investment opportunities. These are: (1) the high level of capital outlays (in absolute terms); (2) the growth in the size of business firms; (3) the delegation of responsibility for initiating recommendations from top management to the profit center, which has been part of the general movement toward decentralization; and (4) the growing use of "scientific management" in the operations of the business firm.

Suggested Citation

  • Myron J. Gordon & Eli Shapiro, 1956. "Capital Equipment Analysis: The Required Rate of Profit," Management Science, INFORMS, vol. 3(1), pages 102-110, October.
  • Handle: RePEc:inm:ormnsc:v:3:y:1956:i:1:p:102-110
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    File URL: http://dx.doi.org/10.1287/mnsc.3.1.102
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