The Positive Net Present Value of Loss-making Projects: Economic Content of the Two Internal Rates of Return

Mária Illés ()
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Mária Illés: University of Miskolc

Theory Methodology Practice (TMP), 2020, vol. 16, issue 02, 41-50

Abstract: This paper examines the economic content of the positive net present value of a project type that is loss-making and has two internal rates of return. The most important finding is that the economic content of a positive net present value is false in such cases. The financial source of the missing amount to reach the level of business efficiency is a false interest income generated by the method. In such cases, the two internal rates of return are also derived from false interest income. The revealed and mathematically proved causality relationships usually prevail in some form in the case of other types of non-conventional cash flows as well.

Keywords: net present value; internal rate of return; non-conventional cash flow; investment project evaluation; loss-making project (search for similar items in EconPapers)
JEL-codes: D25 G31 G39 M21 O22 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:mic:tmpjrn:v:16:y:2020:i:02:p:41-50

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