Ranking Investments with Internal Rate of Return and Benefit - Cost Ratio: A Revision

Ignacio Velez-Pareja ()

No 7875, Proyecciones Financieras y Valoración from Master Consultores

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 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)
Pages: 16
Date: 2011-01-24
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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:007875

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