A resolution to the NPV–IRR debate?

Osborne, Michael

doi:10.1016/j.qref.2010.01.002

Cited by 118 publications

(32 citation statements)

References 9 publications

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“…Due to the fact that the investment would include the modernization of these buildings by adjusting the existing technical infrastructure and implementing the RWHS, the financial analysis was carried out on the basis of two ratios: Net Present Value (NPV) and Discounted Payback Period (DPP). Each of them provides useful information in the decision-making process, where NPV is the most-used criterion in the assessment of investment projects [51].…”

Section: Financial Analysismentioning

confidence: 99%

An Analysis of the Effectiveness of Two Rainwater Harvesting Systems Located in Central Eastern Europe

Stec

Zeleňáková

2019

Water

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Decentralized water systems are perceived as solutions that not only save water, but also as a way to partially or completely become independent from centralized suppliers. Taking this into account, an analysis of the effectiveness of rainwater harvesting systems (RWHS) for toilet flushing in existing academic facilities located in Poland and in Slovakia was carried out. The tests took into account the different volumes of storage tanks collecting rainwater. On the basis of two financial ratios, namely Net Present Value and Discounted Payback Period, the profitability of these systems was also assessed. The research was extended by the sensitivity analysis, which allowed determination of the impact of changes in individual cost components on the financial effectiveness of the investments considered. The results obtained clearly showed that the implementation of RWHS in the dormitory in Rzeszów was unprofitable for all tank capacities tested, and the payback period significantly exceeded the period of 30 years accepted for the analysis. Completely different results were obtained for RWHS in a dormitory located in the city of Košice, for which the financial ratios NPV (Net Present Value) and DPP (Discounted Payback Period) were very favorable. It was also confirmed by the results of the sensitivity analysis. The use of rainwater for toilet flushing caused that it was possible to achieve water savings of an average of 29% and 18%, respectively, for facilities located in Slovakia and Poland. The results of the research have a practical aspect and can provide an indication for potential investors and managers of academic facilities, similar to those analyzed in the article. Taking into account that in many countries water and sewage rates are significantly higher than in Poland and Slovakia, the cost-effectiveness of using the analyzed installation options in these countries could be even higher.

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Section: Financial Analysismentioning

confidence: 99%

An Analysis of the Effectiveness of Two Rainwater Harvesting Systems Located in Central Eastern Europe

Stec

Zeleňáková

2019

Water

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“…The NPV-, IRR-and LCOE/LCOH-values are calculated based on the free cash flows over the lifetime of the plant using the appropriate excel functions and by utilizing the solver function. The formula for NPV (modified from [26]) is…”

Section: Market and Investment Analysismentioning

confidence: 99%

The Possible Role of Modular Nuclear Reactors in District Heating: Case Helsinki Region

Värri

Syri

2019

Energies

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To answer the challenges presented by climate change, all aspects of our energy systems have to carry out a rapid transition towards decarbonisation. This is especially true for the European heating sector that still relies heavily on fossil fuels. District heating systems have been traditionally praised for their efficiency, but replacing old fossil fuel based combined heat and power (CHP) plants is an ongoing challenge, and also the sustainability of biomass as a large-scale option can be considered questionable. Small modular nuclear reactors are one of the potential sources of future CO2-free district heat production. We evaluate the suitability and cost-effectiveness of these plants for district heating through literature review and scenario modelling. The technical aspects of small modular reactors seem promising but there is still a significant amount of uncertainty around both their costs and deployability. The scenario modelling assesses the investment in 300 MWdh of new district heating capacity in the Helsinki Metropolitan area in 2030 either as a CHP plant or as a heat-only boiler. The results indicate that a modular nuclear heat-only boiler could be profitable, while profitable investment in a modular nuclear CHP plant relies heavily on future electricity market price levels.

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“…We measure deal‐level performance from the perspective of the VC firm by using the IRR and the Cash multiple for each deal, gross of fees and carried interest. Based on the time value of money assumption, the IRR depicts an implied discount rate of cash in‐ and out‐flows from portfolio companies that result in a net present value of zero (Osborne, 2010). In general, all included investments follow a similar pattern.…”

Section: The Datamentioning

confidence: 99%

The performance of venture capital investments: Do investors overreact?

2012

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Using a unique proprietary data set of over 5400 realized and unrealized venture capital investments between 1980 and 2005, we examine the impact of demand-related factors, e.g. entrepreneurial activity, as well as supply-related factors, i.e. money provided by VC investors, on the return of individual VC investments. This way, we are able to shed more light on the question whether volatile VC investment returns are rather driven by fundamental changes with regard to the number of attractive investment opportunities or by the overreaction by investors. We find that rising demand for VC, i.e. an increase in entrepreneurial activity, results initially in higher returns. However, our results also indicate that overreaction on the supply side can be observed, destroying deal-level results. Overfunding, specifically overinvesting seems to be a recurring characteristic of the VC industry. In fact, contra-cyclical investment strategies yield highest deal-level returns.

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A resolution to the NPV–IRR debate?

Cited by 118 publications

References 9 publications

An Analysis of the Effectiveness of Two Rainwater Harvesting Systems Located in Central Eastern Europe

An Analysis of the Effectiveness of Two Rainwater Harvesting Systems Located in Central Eastern Europe

The Possible Role of Modular Nuclear Reactors in District Heating: Case Helsinki Region

The performance of venture capital investments: Do investors overreact?

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