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Author: | Beaves, R. C. |
Title: | Net present value and rate of return : Implicit and explicit reinvestment assumptions. |
Journal: | Engineering Economist
1988 : SUMMER, VOL. 33:4, p. 275-302 |
Index terms: | NET PRESENT VALUE RATE OF RETURN CAPITAL INVESTMENT |
Language: | eng |
Abstract: | Generalized net present value and rate of return indices are introduced which allow the analyst to specify a reinvestment rate. Inadequacy of conventional net present value and internal rate of return indices is demonstrated, first all in comparing investment alternatives. Numerical examples are used to show the superiority of the generalized indices. These new indices are relatively easy to calculate and offer a new understanding of net present value and rate of return concepts. Finally they shed considerable light on the reinvestment assumption issue. |
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