Abstract:
Capital budgeting models are important to project selection and combination from multiple alternatives when there are budget and borrowing limits imposed during several time periods,and difference between the interest rates for lending and borrowing.In this paper,Murga's capital budgeting model that considers dividends and terminal wealth is revised to consider the steadiness of the dividend stream better.The shadow prices of the revised models are analyzed and their importance in determining the project acceptance conditions and captital cost and in regulating the dividend stream and the terminal wealth is pointed out based on Kuhn-Tucker condition and the economic interpretation of Kuhn-Tucker multipliers.