Adjusting for Risk in the Capital Budget of a Growth-Oriented Company: Comment**

Abstract

Many important contributions to the body of theoretical literature in business finance are built upon the pioneering efforts of others. In a recent article in this Journal, Vaughn and Bennett attempt to build a risk adjusted capital budgeting framework upon foundations laid by Gordon, Miller and Modigliani, Sharpe, Solomon, and others. Unfortunately, they are building a house of straw. Their knowledge of the contributions of their predecessors is superficial, and their approach is inconsistent with some of the basic tenets of business finance.