On the Rate of Return and Valuation of Non-Conventional Projects
Business and Management Review Vol. 3(12) pp. 01 – 06 October, 2014
6 Pages Posted: 19 Oct 2015
Date Written: October 19, 2015
I provide a solution for evaluating non-conventional projects, firstly showing that the well-known modified internal rate of return does not answer correctly what investors want to measure. Even if one correctly uses the net present value criterion for capital budgeting, I show that it fails for non-conventional projects. My contribution is thus twofold: To yield the correct rate of return for non-conventional projects and to allow practitioners to correctly calculate comparable net present values to take correct investment decisions.
Keywords: Project valuation, Rate of return, Non-conventional cash flows, Modified internal rate of return, NPV and IRR
JEL Classification: G11, G31
Suggested Citation: Suggested Citation