Build of Indicators of Operating Profitablenesses in Projects with Multiple Values IRR. Examples and Comments

20 Pages Posted: 29 Jan 2021

Date Written: December 3, 2020

Abstract

The technique of applying the method of replacement credits to build the operating and real profitableness of the investor and recipient in investment projects with multiple (simple and multiple) IRRs value is shown. In each of the replacement credits, the interest rate is chosen equal to one of the IRR values, and the areas of operating profitableness of project participants are defined as the intervals of the discount rate where the discounted amounts of interest payments are positive (for the investor) or negative (for the recipient). In such areas, the operating profitablenesses of project participants are taken equal to the selected IRRs value. As a result, the operating and real profitablenesses of the investor and the recipient are determined in the form of unequivocal piecewise-constant functions. A dynamic interpretation of the areas of operating profitableness as areas of attraction or repulsion of the singular points of a dynamic system with a phase velocity equal to NPV is given. Using a dynamic interpretation allows you to build profitability indicators in the form of piecewise constant functions of the discount rate for investment projects of the most general form solely on the basis of known IRR values.

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

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

Suggested Citation

Zhevnyak, Alexander, Build of Indicators of Operating Profitablenesses in Projects with Multiple Values IRR. Examples and Comments (December 3, 2020). Available at SSRN: https://ssrn.com/abstract=3742385 or http://dx.doi.org/10.2139/ssrn.3742385

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