Comment: The Unique, Real Internal Rate of Return

Robert Capettini, Richard A. Grimlund and Howard R. Toole

Journal of Financial and Quantitative Analysis, 1979, vol. 14, issue 5, 1091-1094

Abstract: In the June 1978 issue of this Journal, Herbst [2, p. 363] cautioned the reader to beware of a unique, real internal rate of return (IRR) because such a return is “an incorrect measure of the return on investment” for a mixed project. While it is true, as discussed by Teichroew, Robichek and Montalbano (TRM) [4], and now by Herbst, that a mixed project may have a unique IRR, several additional observations developed by TRM should be added to Herbst's discussion. These comments will clarify the implications of Herbst's paper for a decision maker who has a mixed project with a unique real IRR.

Date: 1979
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