Possibilities of MIRR method application for evaluation of investments in agriculture: An example of pigs fattening

Ivanović, Sanjin; Nastić, Lana; Bekić, Bojana

doi:10.5937/ekopolj1502325i

Cited by 4 publications

(4 citation statements)

References 4 publications

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“…As a more practical version of IRR, the real-life applications include: the analysis of investment in pigs fattening-evaluate the growth rate and the further economics revenue; and the analysis of watershed projects. According to the research conducted by Ivanovic et al [29], they had a conclusion that this investment is economically benefit for the investor because the MIRR was higher than cost of capital. Moreover, the application of MIRR helps in the research of watershed evaluation.…”

Section: Modified Internal Rate Of Return Mirrmentioning

confidence: 99%

Studies on the Modifications and Applications of the Net Present Value and Internal Rate of Return

Tan¹,

Chen²,

Wang³

et al. 2022

Advances in Social Science, Education and Humanities Research

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In terms of investment decision making, it is vital for the decision makers, to be able to select the investment project that is the most profitable. Therefore, various models are established including the net present value (NPV) and the internal rate of return (IRR) for the investors to compare different investment projects. In this paper, studies by scholars focusing on the advantages and disadvantages, and the modifications as well as applications of the NPV and IRR models are summarized and presented, along with further prediction of future market situations. Studies have also suggested that the prediction of cost of capital has to be carefully taken into consideration in NPV, and the pitfalls of IRR when encountering non-conventional cash flows which multiple numbers of IRR may be attained. In addition, further studies have shown that the feasibility of NPV and IRR are limited, due to the non-conventional cash flow, thus several modified versions of NPV and IRR were constructed including Max-NPV, Decouple NPV, Modified IRR, and Average IRR. Moreover, this paper analyses the improvements among the amendments upon the two models, by eliminating the problems of inconsistencies of NPV and IRR; case studies are also discussed to clarify the practical uses of the modified versions. Despite the coherent results obtained from the calculations, analysis of individual investment projects should still be done, in order to work out the optimal decision.

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Section: Modified Internal Rate Of Return Mirrmentioning

confidence: 99%

Studies on the Modifications and Applications of the Net Present Value and Internal Rate of Return

Tan¹,

Chen²,

Wang³

et al. 2022

Advances in Social Science, Education and Humanities Research

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show abstract

“…Moreover, the IRR may have a non-unique solution. These issues have attracted various researchers to develop alternative investment evaluation methods to overcome this problem such as the MIRR method, which has become most frequently used in capital budgeting practices (Solomon, 1956;Lin, 1976;Athanasopoulos, 1978;Balyeat et al, 2013;Ivanović et al, 2015;Sabri & Sarsour, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…The MIRR assumes that the returns obtained from the positive cash flows of an investment project will be reinvested at the external rate of return, which is formally equal to the equity's cost of capital. Some financial analysts assert on implementing the MIRR method for both conventional and non-conventional investment projects (Bernhard, 1979;McDaniel et al, 1988;Kelleher & MacCormack, 2004;Kierulff, 2008;Balyeat et al, 2013;Ivanović et al, 2015;Kengatharan, 2016), although the MIRR formula is, in fact, simply an additional exhibition of the NPV (Kulakova & Kulakov, 2014). On the other hand, Kulakov and Kastro (2017) concluded that the IRR method was appropriate in evaluating investment with conventional rather than nonconventional projects.…”

Section: Introductionmentioning

confidence: 99%

Evaluating the Investment in the Malaysian Construction Sector in the Long-run Using the Modified Internal Rate of Return: A Markov Chain Approach

Sarsour¹,

Sabri²

2020

JAFEB

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In capital budgeting practices, investment project evaluations based on the net present value (NPV) and the internal rate of return (IRR) represent the traditional evaluation techniques. Compared with the traditional methods, the modified internal rate of return (MIRR) gives the opportunity to evaluate an investment in certain projet, while taking the changes in cash flows over time and issuing shares such as dividing shares, bonuses, and dividend for each end of the investment year into account. Therefore, this study aims to evaluate an investment in the Malaysian construction sector utilizing financial data for 39 public listed companies operating in the Malaysian construction sector over the period from Jan 1, 2007, to December 30, 2018, based on the MIRR method. Stochastic was studied in this study to estimate the estimated probability by applying the Markov chain model to the MIRR method where the transition matrix has two possible movements of either Good (G) or Bad (B). it is found that the long-run probability of getting a good investment is higher than the probability of getting a bad investment in the long-run, where were the probabilities of good and bad are 0.5119, 0.4881, respectively. Hence, investment in the Malaysian construction sector is recommended.

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“…Having in mind variability of market prices,Zekić et al (2007) stated that pig producers have an uncertain position, while the supply of processing industry is unstable Zekić et al (2008). determined economic and technological challenges related to the production of piglets and fattened pigs on family farms Ivanović et al (2015). indicated that economic evaluation of investments in pig production requires application of modified internal rate of return -MIRR (instead of traditional internal rate of return approach) due to a significant variation of net cash flow in pig fattening operation.…”

mentioning

confidence: 99%

Investments in Serbian Pig Production – Influence of Regional Disparities

Ivanović¹,

Nastić²,

Savić³

2023

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Pig production is one of the most important elements of Serbian livestock breeding sector. Although it faces numerous challenges, there is not enough research focused on its economic effectiveness. The goal of this research is to analyze influence of regional disparities on economic efficiency of investments in Serbian pig production. The main methodological approach was to determine the present value of investments in pig production (for Mačva and Šumadija regions). Authors applied sensitivity and scenario analysis, as well. Riskiness of investments is compared using standard deviation and coefficient of variation of the expected present value. The results indicated significant influence of labor costs on net cash flows (especially in Šumadija region). Analysis revealed that (in usual circumstances) investments in pig production in Mačva region are more economically efficient. Nevertheless, rather small increase in pig price could lead to equal present values in both regions. It was determined that investments are riskier in Šumadija region.

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Possibilities of MIRR method application for evaluation of investments in agriculture: An example of pigs fattening

Abstract: In the case of some agricultural investments, often net cash flow changes its sign from positive

Cited by 4 publications

References 4 publications

Studies on the Modifications and Applications of the Net Present Value and Internal Rate of Return

Studies on the Modifications and Applications of the Net Present Value and Internal Rate of Return

Evaluating the Investment in the Malaysian Construction Sector in the Long-run Using the Modified Internal Rate of Return: A Markov Chain Approach

Investments in Serbian Pig Production – Influence of Regional Disparities

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