On the Rate of Return and Valuation of Non-Conventional Projects

Carlos Heitor Campani: We provide a solution for evaluating non-conventional projects, firstly showing that the well-known modified internal rate of return does not correctly answer what investors want to measure.

Author(s):

Carlos Heitor Campani

Professor of Finance, COPPEAD Graduate School of BusinessResearch Associate, EDHEC-Risk Institute

Even if one correctly uses the net present value criterion for capital budgeting, we show that it fails for nonconventional projects. Our contribution is thus twofold: To yield the correct rate of return for nonconventional projects and to allow practitioners to correctly calculate comparable net present values to take correct investment decisions.

Type: Working paper
Date: le 06/10/2014
Research Cluster : Finance

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