Ranking and optimal selection of investments with internal rate of return and benefit-cost ratio: a revision

Vélez Pareja Ignacio ()
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Vélez Pareja Ignacio: Universidad Tecnológica de Bolívar
Authors registered in the RePEc Author Service: Ignacio Velez-Pareja ()

Contaduría y Administración, 2012, vol. 57, issue 1, 29-51

Abstract: The purpose of this paper is to present a procedure to include the implicit assumptions of Net Present Value (npv ) in the Internal Rate of Return (irr ), and the profitability index (benefit–cost ratio b/cr). The resulting indicators are the weighted irr (wirr ) and the expanded b/cr (eb/cr). These two desirability measures are designed for variable and constant discount rates. They have the property to coincide with the npv ranking for investment analysis and hence, will maximize value. Examples are presented.

Keywords: Net present value; npv; internal rate of return; irr; benefit–cost ratio; b/cr; profitability index; npv assumptions (search for similar items in EconPapers)
JEL-codes: D92 E22 E31 G31 (search for similar items in EconPapers)
Date: 2012
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