Chapter 6. Profitableness of borrowing projects. Localization of substitute loans

Alexandr Zhevnyak

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Abstract: By the method of replacementing loans in the borrowing project is build the indicators of operating profitableness of the investor and recipient as piece-constant functions of discount rate that taking in different intervals of the changes in the discount rate have the different values from their bunch. In practice, this is done using the localization of replacementing loans, which consists in establishing the connection between individual intervals of the discount rate values and the IRR values. A graphical and dynamic interpretation of the localization procedure is given. It is shown that the regions of the operating profitableness of the investor and the recipient will be respectively the areas of attraction and repulsion of the singular points of one-dimensional dynamical systems (ODS), which are the IRR values. The speed of the motion of the phase point in such ODS is set by the NPV of the project as a function of the discount rate. Examples by constructing phase trajectories of ODS in projects with simple and multiple IRR values are given.

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