Evaluation of Nonconventional Projects

Kulakov, Nikolay Yu.; Kulakova, Anastasia N.

doi:10.1080/0013791x.2012.763079

Cited by 13 publications

(5 citation statements)

References 20 publications

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“…It was concluded that the GNPV method worked in all the cases considered. This work has found advantages of the GNPV method in agreement with Kulakova and Kulakov (2012) that (i) the MARR is not required, as is the case with the NPV method, to find a solution of the problem; (ii) the internal (financing) rate may not have to be equal to the external (reinvestment) rate which is the basis for the IRR method; and (iii) internal and external rates need not to be assumed, as is the case with the MIRR method, to obtain GNPV diagram, but these are required to determine if a specific project is attractive or unattractive. One disadvantage to be noted is that the number of steps involved and corresponding computational work in some cases may be overwhelming.…”

Section: Discussionsupporting

confidence: 57%

“…However, all these methods work with certain assumptions and have their own limitations. Therefore, Kulakova and Kulakov (2012) have presented the GNPV method to evaluate such projects. They have illustrated the method with three examples: a project of 2-year life with multiple IRRs, a project of 2-year life without IRR and a project of 3-year life with a unique real-valued IRR, which is not the rate of return.…”

Section: Discussionmentioning

confidence: 99%

“…The study has been described with more details in Song (2014). Kulakova andKulakov (2012, 2013) implemented this method on simple projects having a short cash-flow period (2-4 years). In this study, the GNPV method has been applied to more complicated projects with a longer cash-flow period (5-10 years).…”

Section: Introductionmentioning

confidence: 99%

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Evaluation of the GNPV Method for Decision-making in Non-conventional Projects

Song

Badar

McLeod

et al. 2015

Asia-Pacific Journal of Management Research and Innovation

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Kulakova and Kulakov (2012) have presented the generalised net present value (GNPV) method to evaluate non-conventional projects. They have illustrated the method with three examples: a project of 2-year life with multiple internal rate of returns (IRRs), a project of 2-year life without IRR and a project of 3-year life with a unique real-valued IRR, which is not the rate of return. The purpose of the present study was to test the validity and feasibility of the GNPV method in evaluating other non-conventional projects with a longer life. The method was used to evaluate five scenarios: a project of 5-year life with multiple IRRs; a project of 7-year life with multiple IRRs, which were not the rates of return; a project of 10-year life with a positive and a negative IRR meaning the positive value was the unique IRR; a project of 7-year life with a salvage value and a unique IRR; and a staged expansion project of 10-year life with a unique IRR. It was concluded that the GNPV method worked in all the five cases considered. Advantages of the GNPV method were noticed in agreement with Kulakova and Kulakov (2012) that (i) the minimum attractive rate of return (MARR) was not required to find a solution; (ii) the internal (financing) rate may be different from the external (reinvestment) rate; and (iii) internal and external rates are not necessarily required for solution, but are required for evaluation of the projects. One disadvantage was observed that the computational work in some cases might be overwhelming.

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Section: Discussionsupporting

confidence: 57%

Section: Discussionmentioning

confidence: 99%

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Evaluation of the GNPV Method for Decision-making in Non-conventional Projects

Song

Badar

McLeod

et al. 2015

Asia-Pacific Journal of Management Research and Innovation

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“…The cash flows prepared were unconventional as described by the authors in [54]. Thus, we prepared the budget based on cash inflows and outflows that occurred over the planning horizon (Equation ( 1)).…”

Section: Deterministic Modelmentioning

confidence: 99%

Investments in Pinus elliottii Engelm. Plantations: Real Options Analysis in Discrete Time

Martins

Silva

Munis

et al. 2022

Forests

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Background: The commonly used methods for the financial evaluation of plantation forest investment projects do not incorporate uncertainties and ignore the value related to flexibility. The real options analysis makes it possible to capture these values in investment projects, increasing their value and return. Despite this, studies involving real options in forest investment projects are scarce, specifically those related to Pinus spp. Therefore, this study aimed to: (a) analyze whether the real options analysis adds value to investment projects of Pinus elliottii Engelm. plantations; and (b) make the real options analysis more accessible to forest managers and potentially increase its use in the investment projects of Pinus spp. plantations. Methods: We evaluated two investment projects in P. elliottii plantations in southern Brazil, which differed in the way of obtaining the land for planting: with lease or purchase of land on a planning horizon of 21 years. In the real options analysis, we used deferral, expansion, and abandonment. Results: Individually, the deferral, expansion, and abandonment options add value to investment projects in Pinus elliottii plantations. The option to expand the forested area is one that adds the most value to the investment project with land lease. In the investment project with land purchase, it is abandonment. Conclusions: Investment projects in Pinus elliotti plantations that contemplate the land purchase analyzed through the real options analysis present higher financial returns than those that consider land lease, inverting the result provided by the traditional analysis.

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“…6 It may be helpful to recall that (in this paper as well as in TRM 1965a,b) is assumed to be both a lending rate and a financing rate. 7 Kulakov and Kulakova's (2013) Generalized Internal Rate of Return is equal to TRM's PIR and the Generalized External Rate of Return is equal to TRM's PFR. 8 Recently, Chiu and Garza Escalante (2012) extended Rule (A) allowing for time-variant COCs, .…”

Section: Proposition 8 For Any Acceptable Interest Rate (Ie Belongmentioning

confidence: 99%

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Magni

2016

Journal of Mathematical Economics

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Abstract. This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPVconsistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it is capable of solving the conundrums originated by the rate-of-return notion and represents a unifying theoretical paradigm under which every existing measure of wealth creation can be subsumed. We show that a rate of return is underdetermined by the project's cash-flow stream; in particular, a unique return function (not a unique rate of return) exists for every project which maps depreciation classes into rates of return. The various shapes a rate of return can take on (internal rate of return, average accounting rate of return, modified internal rate of return etc.) derive from the (implicit or explicit) selection of different depreciation patterns. To single out the appropriate rate of return for a project, auxiliary assumptions are needed regarding the project's capital depreciation. This involves value judgment. On one side, this finding opens terrain for a capital valuation theory yet to be developed; on the other side, it triggers the creation of a toolkit of domainspecific and purpose-specific metrics that can be used, jointly or in isolation, for analyzing the economic profitability of a given project. We also show that the AIRR perspective has a high explanatory power that enables connecting seemingly unrelated notions and linking various disciplines such as economics, finance, and accounting. Some guidelines for practitioners are also provided.

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Evaluation of Nonconventional Projects

Cited by 13 publications

References 20 publications

Evaluation of the GNPV Method for Decision-making in Non-conventional Projects

Evaluation of the GNPV Method for Decision-making in Non-conventional Projects

Investments in Pinus elliottii Engelm. Plantations: Real Options Analysis in Discrete Time

Capital depreciation and the underdetermination of rate of return: A unifying perspective

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