Cost‐benefit Analysis and the Controversial Reinvestment Assumption in <scp>IRR</scp> and <scp>NPV</scp> Estimates: Some New Evidence Against Reinvestment Assumption

Arjunan, Kannapiran C.; Kannapiran, Karthi

doi:10.1111/1759-3441.12179

Cited by 3 publications

(1 citation statement)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Arjunan (,b, ) and Arjunan and Kannapiran () conducted detailed numerical analyses, specifically focusing on the problems discussed in Section above, and concluded: (i) NNCF is a data problem that affects both NPV and IRR; (ii) neither MIRR nor NPV rule could solve the problems associated with multiple IRR; (iii) reinvestment of intermediate income is common with NNCF and some normal NCF; and (iv) IRR, estimated by the CAS or modified capital amortisation (MCAS) method, can resolve the data problems for independent and mutually exclusive projects.…”

Section: Literaturementioning

confidence: 99%

Non‐monotonic NPV Function Leads to Spurious NPVs and Multiple IRR Problems: A New Method that Resolves these Problems

Arjunan¹

2019

J of App Econs and Policy

Self Cite

View full text Add to dashboard Cite

The causes and effects of non‐monotonic NPV functions are evaluated and the results presented in this paper. Reinvestment of intermediate income causes non‐monotonic NPV function. Non‐monotonic NPV function not only leads to multiple IRRs but also to spurious NPVs. The capital amortisation (CAS) method used in this analysis transparently reveals if there is any reinvestment. A modified CAS method, discussed in this paper, eliminates the reinvestment and resolves the problems of non‐monotonic NPV function, reinvestment, spurious NPVs and multiple IRR. The current practice of using NPV as the preferred criterion, when there are multiple IRRs, is not appropriate.

show abstract

Section: Literaturementioning

confidence: 99%

Non‐monotonic NPV Function Leads to Spurious NPVs and Multiple IRR Problems: A New Method that Resolves these Problems

Arjunan¹

2019

J of App Econs and Policy

Self Cite

View full text Add to dashboard Cite

show abstract

Project Investment Decisions: Comparison of Nonmonetary Benefits

Rajabi Asadabadi

2024

J. Constr. Eng. Manage.

View full text Add to dashboard Cite

Methodology for calculating the net present value of investment project, taking into account the variability of determining the cash flow of capital investments

GUZHEV¹

2022

View full text Add to dashboard Cite

Subject. The article considers the variability of determining the cash flow of capital investments and methodology for calculating the net present value (NPV) of an investment project, taking into account the said variability. Objectives. The aim is to propose a methodology to calculate NPV, given the influence of variability in determining the cash flow from investing activities in terms of outflows, i.e. the required volume of investments to create new fixed assets. Methods. The study employs generally accepted scientific methods of information analysis and synthesis. Results. I analyzed modern domestic and foreign approaches and methods for calculating NPV of an investment project, formulated the concept of cash flow of capital investments, offered my own methodology for its variable determination. The methodology for NPV calculation covers three scenarios of investment project implementation: baseline, optimistic and pessimistic. The paper includes the impact analysis of variability of the determination of cash flow of capital investments on NPV of investment project. Conclusions. The paper defines the nature of the influence of variability in determining the cash flow of capital investments on the NPV of an investment project. The findings can be used to calculate and plan targeted indicators of investment performance (NPV), when evaluating and implementing investment projects, regardless of sources of financing.

show abstract

Cost‐benefit Analysis and the Controversial Reinvestment Assumption in IRR and NPV Estimates: Some New Evidence Against Reinvestment Assumption

Cited by 3 publications

References 18 publications

Non‐monotonic NPV Function Leads to Spurious NPVs and Multiple IRR Problems: A New Method that Resolves these Problems

Non‐monotonic NPV Function Leads to Spurious NPVs and Multiple IRR Problems: A New Method that Resolves these Problems

Project Investment Decisions: Comparison of Nonmonetary Benefits

Methodology for calculating the net present value of investment project, taking into account the variability of determining the cash flow of capital investments

Contact Info

Product

Resources

About