Profitableness of Investment and Borrowing Projects. Problems and Prospects

Abstract

The problems associated with the construction of a measure of profitableness of investment projects are discussed, including the problem of a meaningful interpretation of the sense of IRR in the traditional form for the economy of the ratio of income and expenses. In is proposed to build a profitableness analysis of investment and borrowing projects on the basis of a mathematical model with two participants in form an investor and a recipient, where recipient can be considered as representative of the financial market external to the project. Such a model was formed in the theory of credit, where the dynamics of the financial interaction of participants during its implementation is described by an sign alternating function of discrete time, in the form the current indebtedness of credit. For her adaption to the analysis of general investment projects (including projects with multiple simple and multifold IRR values), the main patterns of the dynamics of credit indebtedness are considered in detail. There is highlighted the general properties of investment and borrowing projects.

Keywords: investment project, credit, profitableness, credit indebtedness, interest payments, NPV, IRR.

JEL Classification: G11, G12, G31, G32, O22