The Choice of Technique with Multiple and Complex Interest Rates
19 Pages Posted: 16 Nov 2016
Date Written: November 14, 2016
This paper clarifies the relationships between Internal Rates of Return, Net Present Value, and the analysis of the choice of technique in models of production analyzed during the Cambridge capital controversy. Multiple and possibly complex roots of polynomial equations defining the IRR are considered. An algorithm, using these multiple roots to calculate the NPV, justifies the traditional analysis of a reswitching example.
Keywords: Net Present Value, Internal Rate of Return, Choice of technique, reswitching
JEL Classification: B4, C63, D24, E43, G11, G31
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