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1994•The Engineering EconomistRequires access

OVERALL RATES OF RETURN: INVESTMENT BASES, REINVESTMENT RATES AND TIME HORIZONS

David M. Shull

Open publisher page 21 citations

Abstract

This paper compares and contrasts several previously proposed rate of return capital budgeting methodologies. It focuses on recently proposed overall rate of return methods that provide NPV-consisient project evaluations. The examination is undertaken by introducing a conceptual framework to characterize rate of return methods along the following three parameters: (1) the investment base, (2) the reinvestment rate, and (3) the lime horizon over which projects are evaluated. This parametric framework highlights differences among alternative rate of return methods so that they can be easily compared and contrasted. Additionally, the examination suggests appropriate potential applications for the alternative methodologies.

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What this paper is about

This paper compares and contrasts several previously proposed rate of return capital budgeting methodologies. It focuses on recently proposed overall rate of return methods that provide NPV-consisient project evaluations. The examination is undertaken by introducing a conceptual framework to characterize rate of return methods along the following three parameters: (1) the investment base, (2) the reinvestment rate, and (3) the lime horizon over which projects are evaluated. This parametric framework highlights differences among alternative rate of return methods so that they can be easily compared and contrasted. Additionally, the examination suggests appropriate potential applications for the alternative methodologies.

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OpenAlex reports 21 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper compares and contrasts several previously proposed rate of return capital budgeting methodologies. It focuses on recently proposed overall rate of return methods that provide NPV-consisient project evaluations. The examination is undertaken by introducing a conceptual framework to characterize rate of return methods along the following three parameters: (1) the investment base, (2) the reinvestment rate, and (3) the lime horizon over which projects are evaluated. This parametric framework highlights differences among alternative rate of return methods so that they can be easily compared and contrasted. Additionally, the examination suggests appropriate potential applications for the alternative methodologies.

Key concepts: Rate of return, Internal rate of return, Time-weighted return, Capital budgeting, Investment performance, Modified internal rate of return, Return on investment, Holding period return

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