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

See all articles by Carlos Heitor Campani

Carlos Heitor Campani

The COPPEAD Graduate School of Business - Federal University of Rio de Janeiro (UFRJ)

Date Written: October 19, 2015

Abstract

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

Campani, Carlos Heitor, On the Rate of Return and Valuation of Non-Conventional Projects (October 19, 2015). Business and Management Review Vol. 3(12) pp. 01 – 06 October, 2014. Available at SSRN: https://ssrn.com/abstract=2676033

Carlos Heitor Campani (Contact Author)

The COPPEAD Graduate School of Business - Federal University of Rio de Janeiro (UFRJ) ( email )

Rua Pascoal Lemme n. 355
Rio de Janeiro, 21949-961
Brazil

HOME PAGE: http://www.coppead.ufrj.br

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