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Title:

COMMON MISUNDERSTANDINGS ABOUT THE INTERNAL-RATE-OF-RETURN AND NET PRESENT VALUE ECONOMIC ANALYSIS METHODS (DISCUSSION AND CLOSURE)

Accession Number:

00312460

Record Type:

Component

Availability:

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Order URL: http://worldcat.org/isbn/0309029864

Abstract:

Engineering economy and benefit/cost analysis manuals usually include the net present value and internal-rate-of-return methods for the analysis of mutually exclusive alternatives and, more times than not, contend that both methods, if properly applied, will invariably lead to the same economic decisions. However, it can be demonstrated that such a view is incorrect, as a general rule, and that use of the internal-rate-of-return method can lead to incorrect or ambiguous economic decisions. Accordingly, the purpose of this paper is to define the specific cases and situations in which application of the rate-of-return method will lead to incorrect or ambiguous economic decisions as well as to demonstrate why the net present value method is preferable and to explain the underlying reasons for the differences. Numerous examples will be employed to illustrate the various cases and underlying principles. (Author)

Supplemental Notes:

Publication of this paper sponsored by Task Force on Economic Analysis. Distribution, posting, or copying of this PDF is strictly prohibited without written permission of the Transportation Research Board of the National Academy of Sciences. Unless otherwise indicated, all materials in this PDF are copyrighted by the National Academy of Sciences. Copyright © National Academy of Sciences. All rights reserved.

Monograph Accession #:

00391841

Report/Paper Numbers:

HS-028 842

Corporate Authors:

Transportation Research Board

500 Fifth Street, NW
Washington, DC 20001 United States

Authors:

Wohl, Martin

Editors:

Singer-Bart, S

Discussers:

Winfrey, Robley; Leavenworth, Richard S; Steiner, Henry Malcolm; Bergmann, Dietrich R

Pagination:

pp 1-19

Publication Date:

1979

Serial:

Transportation Research Record

Issue Number: 731
Publisher: Transportation Research Board
ISSN: 0361-1981

ISBN:

0309029864

Media Type:

Print

Features:

Figures (3) ; References (6) ; Tables (5)

Uncontrolled Terms:

Net present value

Subject Areas:

Economics; Highways; Planning and Forecasting; Society

Files:

HSL, TRIS, TRB

Created Date:

Oct 27 1985 12:00AM

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