# Fisher separation theorem

Fisher separation theorem An automated process has detected links on this page on the local or global blacklist. If the links are appropriate you may request whitelisting by following these instructions; otherwise consider removing or replacing them with more appropriate links. (To hide this tag, set the "invisible" field to "true") show List of blacklisted links: In economics, the Fisher separation theorem asserts that the primary objective of a corporation will be the maximization of its present value, regardless of the preferences of its shareholders. The theorem therefore separates management's "productive opportunities" from the entrepreneur's "market opportunities". It was proposed by—and is named after—the economist Irving Fisher.

The theorem has its "clearest and most famous exposition" [1] in the Theory of Interest (1930); particularly in the "second approximation to the theory of interest" (II:VI).

This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (January 2011) (Learn how and when to remove this template message) The Fisher separation theorem states that: the firm's investment decision is independent of the consumption preferences of the owner; the investment decision is independent of the financing decision. the value of a capital project (investment) is independent of the mix of methods – equity, debt, and/or cash – used to finance the project.

Fisher showed the above as follows: The firm can make the investment decision — i.e. the choice between productive opportunities — that maximizes its present value, independent of its owner's investment preferences. The firm can then ensure that the owner achieves his optimal position in terms of "market opportunities" by funding its investment either with borrowed funds, or internally as appropriate. See also Modigliani–Miller theorem The Theory of Investment Value External links Irving Fisher's Theory of Investment, The History of Economic Thought, The New School Great Moments in Financial Economics: Present Value (archived), Prof. Mark Rubinstein, Haas School of Business Model: Perfect capital market - Fisher separation theorem, Dr. Henrik Mathiesen, encycogov.com Fisher's Separation Theorem, investopedia.com Categories: Economics theorems

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