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Unrecovered Investment, Uniqueness of the Internal Rate, and the Question of Project Acceptability

Published online by Cambridge University Press:  19 October 2009

Richard B. Bernhard
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Extract

Consider a productive investment project (or financial security), which would yield a stream of cash flows, positive and negative, over time. A major index of the acceptability of such a project is its internal rate of return, i.e., that rate of interest which discounts all the cash flows from the project to a present worth of zero. Soper [8] has developed a sufficient condition for the internal rate to be unique in the interval, (−1,∞), along the real line. Then, if the project requires an initial outlay, if Soper's condition holds, and if the unique internal rate exceeds the market rate of interest in each period of the project's life, the project's present worth is positive, and hence, other things being equal, it is worth undertaking.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 1 , March 1977 , pp. 33 - 38
Copyright
Copyright © School of Business Administration, University of Washington 1977

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References

REFERENCES

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