Addendum to ‘Average Internal Rate of Return and Investment Decisions: A New Perspective’

The Engineering Economist, 56(2), 181-182

3 Pages Posted: 7 Mar 2011 Last revised: 3 Oct 2013

See all articles by Carlo Alberto Magni

Carlo Alberto Magni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering)

Date Written: March 3, 2011

Abstract

This note specifies some results found in [Magni 2010. The Engineering Economists, 55(2), 150-180] where the Average Internal Rate of Return (AIRR) is presented, which overcome all the IRR difficulties. In particular, the AIRR approach enables to prove that (1) a project is not uniquely associated with a return rate, but with a return function, which maps aggregate capitals to rates of return; (2) any definition of rate of return appearing in the (past and) future literature is a particular case of AIRR; (3) for choices between mutually exclusive projects, the AIRR acceptability criterion may be applied to the incremental project; (4) the AIRR approach easily provides the evaluator with the rate of return on initial investment, whereas the IRR is only the rate of return on an aggregate capital which is internally implied by the IRR itself.

Keywords: rate of return, capital investment analysis, internal rate of return, AIRR

JEL Classification: G11, G12, G31

Suggested Citation

Magni, Carlo Alberto, Addendum to ‘Average Internal Rate of Return and Investment Decisions: A New Perspective’ (March 3, 2011). The Engineering Economist, 56(2), 181-182, Available at SSRN: https://ssrn.com/abstract=1776460

Carlo Alberto Magni (Contact Author)

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering) ( email )

Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
159
Abstract Views
1,753
rank
203,425
PlumX Metrics