Teaching Net Present Value Analysis: Returns-to-Assets versus Returns-to-Equity

Stephen E. Miller and Garnett L. Bradford

Review of Agricultural Economics, 2001, vol. 23, issue 1, 223-241

Abstract: We surveytextbooks from agricultural economics and other subject matter areas to determine their treatments of the returns-to-assets versus returns-to-equitymethods for determining the net present value of investment projects. Textbook authors disagree about the appropriate method, often give conflicting advice as to how a given method should be applied, and do not show how the results of the two methods can be reconciled. We provide a consolidated discussion of the circumstances under which the two methods produce the same net present value.

Date: 2001
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