کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
6469077 | 1423738 | 2017 | 11 صفحه PDF | دانلود رایگان |
- IRR-most-used profitability measure, but nonlinear, non-analytic & w/o para-meters.
- Attempts to make IRR more useful/realistic actually have confused the situation.
- Despite IRR's issues, a new measure, NPV%, can help yield more information.
- E.g., effect of Enterprise ROR on NPV% can be interpreted wrt IRR (both fcns of ROIBT).
- But, better approach is to use NPV% directly and obtain its many advantages.
IRR, a widely used profitability measure, is the Discount Rate that yields Net Present Value (NPV)Â =Â 0 for a stream of positive and negative cash flows, at least one of each sign and with no explicit financing payments. A big disadvantage is lack of parameters, such as a project finance rate or the enterprise rate (ER), i.e., Return on Investment of the overarching investment group to serve as a measure of opportunity cost. The coupled metrics proposed earlier by the author- NPVproject and NPV%-do not suffer these disadvantages, so IRR is analyzed in terms of NPV%. Useful information can be obtained from a projection of IRR values onto the NPV%, ER plane revealing the sensitivity of IRR to risk under meaningful operating conditions.
Journal: Computers & Chemical Engineering - Volume 106, 2 November 2017, Pages 396-406