Communications to the Editor—Probability and Rates of Return: Some Critical Comments

A recent issue of this journal presents a paper by Professor F. S. Hillier [Hillier, F. S. 1963. The derivation of probabilistic information for the evaluation of risky investments. Management Sci.9(3, April) 443–457.] in which he develops, under limiting but carefully, stated assumptions, a formal analytic procedure for finding the parameters of a probability distribution of present worth given a known interest rate and probabilistic information about the sequence of cash flows to be discounted. It is the intent of this communication to question the utility of distributions of the internal rate of return given that they have been found.