4 Special Problems in Time Value of Money Methods

Abstract

This is a course material from the book Investment Decision Making. For Firm and Project Valuation. The book is originally in Spanish and is untitled as Decisiones de inversión. Para la valoración financiera de proyectos y empresas.

In this chapter 4 we study some special problems that we find when using the methods studied in chapter 3. We introduce the idea of non constant discount rates, a method to solve the discrepancy among the methods studied in chapter 3. This method solves the problem of the inconsistency that sometimes is present when we use the NPV and the IRR.

Note: Downloadable document is in Spanish.

Keywords: Non constant discount rates, inequal time period, contradictions between NPV, IRR and R B/C

JEL Classification: G31