A compendium and comparison of 25 project evaluation techniques. Part 1: Net present value and rate of return methods

Remer, Donald S.; Nieto, Armando

doi:10.1016/0925-5273(95)00104-2

Cited by 174 publications

(89 citation statements)

References 14 publications

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“…It does not define (i.e., impose) a rate of return for a cashflow stream, but lets rates of return depend on the choice of the decision maker/analyst. Empirical evidence supports the idea that real-life different decision makers choose and use different metrics/rates of return for analyzing an investment (Remer and Nieto 1995a,b, Graham and Harvey 2001, Sandahl and Sjögren, 2003, Slagmulder et al, 1995Hahn and Kuhn, 2012) and that various metrics are often used for the same project (Remer et al, 1993;Lefley,1996;Lindblom and Sjögren, 2009). This is consistent with the AIRR approach, which might then be considered the theoretical support for such an empirical evidence.…”

Section: Insights For Future Research (Iii)supporting

confidence: 63%

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Magni

2016

Journal of Mathematical Economics

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Abstract. This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPVconsistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it is capable of solving the conundrums originated by the rate-of-return notion and represents a unifying theoretical paradigm under which every existing measure of wealth creation can be subsumed. We show that a rate of return is underdetermined by the project's cash-flow stream; in particular, a unique return function (not a unique rate of return) exists for every project which maps depreciation classes into rates of return. The various shapes a rate of return can take on (internal rate of return, average accounting rate of return, modified internal rate of return etc.) derive from the (implicit or explicit) selection of different depreciation patterns. To single out the appropriate rate of return for a project, auxiliary assumptions are needed regarding the project's capital depreciation. This involves value judgment. On one side, this finding opens terrain for a capital valuation theory yet to be developed; on the other side, it triggers the creation of a toolkit of domainspecific and purpose-specific metrics that can be used, jointly or in isolation, for analyzing the economic profitability of a given project. We also show that the AIRR perspective has a high explanatory power that enables connecting seemingly unrelated notions and linking various disciplines such as economics, finance, and accounting. Some guidelines for practitioners are also provided.

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Section: Insights For Future Research (Iii)supporting

confidence: 63%

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Magni

2016

Journal of Mathematical Economics

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“…It is important for users to recognize that the use of tools helps retrofit decision making under uncertainties. A risk assessment on retrofit decisions under uncertainties is a new emerging area in retrofit projects [63]. The many other uncertainties such as service change, human behavior change, government policy change, all of which shift the direction of efficiency measures, also impact toolkit performance.…”

Section: Discussionmentioning

confidence: 99%

Energy retrofit analysis toolkits for commercial buildings: A review

Lee

Hong

Piette

et al. 2015

Energy

102

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a b s t r a c tRetrofit analysis toolkits can be used to optimize energy or cost savings from retrofit strategies, accelerating the adoption of ECMs (energy conservation measures) in buildings. This paper provides an up-todate review of the features and capabilities of 18 energy retrofit toolkits, including ECMs and the calculation engines. The fidelity of the calculation techniques, a driving component of retrofit toolkits, were evaluated. An evaluation of the issues that hinder effective retrofit analysis in terms of accessibility, usability, data requirement, and the application of efficiency measures, provides valuable insights into advancing the field forward. Following this review the general concepts were determined: (1) toolkits developed primarily in the private sector use empirically data-driven methods or benchmarking to provide ease of use, (2) almost all of the toolkits which used EnergyPlus or DOE-2 were freely accessible, but suffered from complexity, longer data input and simulation run time, (3) in general, there appeared to be a fine line between having too much detail resulting in a long analysis time or too little detail which sacrificed modeling fidelity. These insights provide an opportunity to enhance the design and development of existing and new retrofit toolkits in the future.

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“…There are several different cash flow based methods that can be used to measure the financial feasibility of investment projects, such as the NPV, Internal Rate of Return (IRR), Annual Equivalent Worth, Benefit-Cost Ratio and the Modified Internal Rate of Return. Investors use these quantitative measures to help them decide whether to undertake an investment or not, based on their return requirements [8]. The payback period (PBP) is another method that is sometimes used in financial feasibility analysis.…”

Section: Feasibility Studies Measuresmentioning

confidence: 99%

“…In order to evaluate the financial feasibility of an investment project, relevant measurements or criteria need to be specified. [8] categorized the evaluation methods into five basic types: Net present value (NPV) methods; Rate of return methods; Ratio methods; Payback methods and Accounting methods. The cash flow method is considered more appropriate for evaluating the financial feasibility of investment projects [9].…”

Section: Introductionmentioning

confidence: 99%

Economic and Feasibility Studies Using Particle Swarm Optimization for Petroleum and Gas Projects

2017

IJAERD

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A compendium and comparison of 25 project evaluation techniques. Part 1: Net present value and rate of return methods

Cited by 174 publications

References 14 publications

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Energy retrofit analysis toolkits for commercial buildings: A review

Economic and Feasibility Studies Using Particle Swarm Optimization for Petroleum and Gas Projects

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