CAPITAL YIELD (the possibility of using of production function for valuation of firms in Czech economy)
The aim of the article is to create a theoretical support for capital yield determination on the basement of neoclassical microeconomics. The yields of an industrial capital can be used as a discount factor in determination of the value of a firm by discounted cash flow methods. Following the neoclassical assumptions we know that firms are optimising their behaviour and hence they relate the desired capital stock to interest rates and employment to wage in the way of equalization of marginal products of capital and labour to interest rate and wage respectively. A methodology of measuring capital yields by the help of a production function of a sector proposed here follows from the mentioned neoclassical assumptions. An application is made to representative groups of firms belonging to five important industrial sectors in the small economy of the Czech Republic. The results are discussed and compared with others ways of valuation.
yields of capital, technical efficiency, maximization of profit, frontier production function, cross-section production function
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