2012Journal of applied management and investmentsRequires access

An analysis of dependence of the NPV of investment project from the price of invested capital

Alexander G. Yankovoy

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Abstract

The author examines the methodological problems of using the most important criteria for evaluation of investment projects, based on discounted cash flows. The dependence of the NPV of the project of the price of the invested capital is studied. On its basis the author con-siders the main advantages and disadvantages of the properties of the internal rate of return IRR, which is used for evaluation of the effectiveness of the planned production and financial activities of economic entities in different situations, in particular in the presence of an un-usual cash flow.

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What this paper is about

The author examines the methodological problems of using the most important criteria for evaluation of investment projects, based on discounted cash flows. The dependence of the NPV of the project of the price of the invested capital is studied. On its basis the author con-siders the main advantages and disadvantages of the properties of the internal rate of return IRR, which is used for evaluation of the effectiveness of the planned production and financial activities of economic entities in different situations, in particular in the presence of an un-usual cash flow.

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Available abstract

The author examines the methodological problems of using the most important criteria for evaluation of investment projects, based on discounted cash flows. The dependence of the NPV of the project of the price of the invested capital is studied. On its basis the author con-siders the main advantages and disadvantages of the properties of the internal rate of return IRR, which is used for evaluation of the effectiveness of the planned production and financial activities of economic entities in different situations, in particular in the presence of an un-usual cash flow.

Key concepts: Cash flow, Internal rate of return, Investment (military), Modified internal rate of return, Net present value, Capital budgeting, Discounted cash flow, Economics

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