Keywords
Net present value
npv
internal rate of return
irr
benefit–cost ratio
b/cr
profitability index
npv assumptions
npv
internal rate of return
irr
benefit–cost ratio
b/cr
profitability index
npv assumptions
How to Cite
Vélez-Pareja, I. (2011). Ranking and optimal selection of investments with internal rate of return and benefit-cost ratio: a revision. Accounting & Management, 57(1). https://doi.org/10.22201/fca.24488410e.2012.194
Abstract
The purpose of this paper is to present a procedure to include the implicit assumptions of Net Present Value (npv ) in the Internal Rate of Return (irr ), and the profitability index (benefit–cost ratio b/cr). The resulting indicators are the weighted irr (wirr ) and the expanded b/cr (eb/cr). These two desirability measures are designed for variable and constant discount rates. They have the property to coincide with the npv ranking for investment analysis and hence, will maximize value. Examples are presented.© 2015, School of Accounting and Management, National Autonomous University of Mexico. All rights reserved. Publication of the article implies full assignment of property rights (copyright) in Journal of Accounting and Management. The publication mreserves the right to total or partial reproduction of the work in other print, electronic or any other alternative means, but always recognizing its responsibility.
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