Technical Note—the Internal Rate of Return (Irr) as a Financial Indicator

Hajdasiński, Miroslaw M.

doi:10.1080/00137910490453437

Cited by 25 publications

(15 citation statements)

References 16 publications

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“…Economic and financial indicators (Hajdasinski, 2004;Peters and Timmerhaus, 1991;Pintaric and Kravanja, 2006;Tang and Tang, 2003) not include all the additional and reduced environmental burdens throughout the life cycle.…”

Section: Environmental Payback Periodmentioning

confidence: 99%

“…Therefore, incremental evaluation is required in order to compare the environmental performances of alternatives. This incremental approach can be applied to rank mutually exclusive products, systems, processes and services (for example, an air conditioner and a refrigerator), or to rank mutually exclusive alternatives of the same product, system, process and service (for example, ''A'' and ''B'' branded cars) (Hajdasinski, 2004). The environmental indicators are calculated by using incremental environmental burdens which are the difference between the environmental effect scores of an alternative estimated and those of a reference.…”

Section: Environmental Indicatorsmentioning

confidence: 99%

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Environmental indicators for communication of life cycle impact assessment results and their applications

Lim

Park

2009

Journal of Environmental Management

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Section: Environmental Payback Periodmentioning

confidence: 99%

Section: Environmental Indicatorsmentioning

confidence: 99%

Environmental indicators for communication of life cycle impact assessment results and their applications

Lim

Park

2009

Journal of Environmental Management

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“…The economic and managerial literature has thoroughly investigated the IRR shortcomings and a huge amount of contributions in the past eighty years have been devoted to searching for corrective procedures capable of healing its flaws (e.g. Boulding 1935, 1936b, Samuelson 1946Lorie and Savage 1955;Solomon 1956;Hirshleifer 1958;Pitchford and Hagger 1958;Bailey 1959;Karmel 1959;Soper 1959;Wright 1959;Kaplan 1965Kaplan , 1967Jean 1968;Arrow and Levhari 1969;Adler 1970;Ramsey 1970;Norstrøm 1967Norstrøm , 1972Flemming and Wright 1971;Fairley and Jacoby 1975;Aucamp and Eckardt 1976;Bernhard 1967Bernhard , 1977Bernhard , 1979Bernhard , 1980De Faro 1978;Herbst 1978;Ross, Spatt and Dybvig 1980;Dorfman 1981;Cannaday, Colwell and Paley 1986;Gronchi 1986;Hajdasinski 1987Hajdasinski , 2004Promislow and Spring 1996;Tang and Tang 2003;Rocabert, Tarrío and Pérez 2005;Zhang, 2005;Kierulff 2008;Simerská 2008).…”

Section: Introductionmentioning

confidence: 99%

“…The notion of relevant internal rate of return has been studied by Cannaday, Colwell and Paley (1986), Hajdasinski (1987) Hartman and Schafrick (2004). Issues related to the reinvestment assumptions in the IRR criterion and the adoption of the Modified Internal Rate of Return have been analyzed in several contributions, among which Lorie and Savage (1955), Lin (1976), Lohmann (1988), Hajdasinski (2004), Kierulff (2008) (see also the historical perspective of Biondi 2006).…”

Section: Introductionmentioning

confidence: 99%

Average Internal Rate of Return and Investment Decisions: A New Perspective

Magni

2010

The Engineering Economist

131

104

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The internal rate of return (IRR) is often used by managers and practitioners for investment decisions. Unfortunately, it has serious flaws: (i) multiple real-valued IRRs may arise, (ii) complex-valued IRRs may arise, (iii) the IRR is, in general, incompatible with the net present value (NPV) in accept/reject decisions (iv) the IRR ranking is, in general, different from the NPV ranking, (v) the IRR criterion is not applicable with variable costs of capital. The efforts of economists and management scientists in providing a reliable project rate of return have generated over the decades an immense bulk of contributions aiming to solve these shortcomings. This paper offers a complete solution to this long-standing issue by changing the usual perspective: the IRR equation is dismissed and the evaluator is allowed to describe the project as an investment or a borrowing at his discretion. This permits to show that any arithmetic mean of the one-period return rates implicit in a project reliably informs about a project's profitability and correctly ranks competing projects. With such a measure, which we name "Average Internal Rate of Return", complex-valued numbers disappear and all the above mentioned problems are wiped out. The economic meaning is compelling: it is the project return rate implicitly determined by the market. The traditional IRR notion may be found back as a particular case.

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“…According to [19], the IRR gives the private investor's point of view and the NPV the society's point of view. Thus, the tool gives the possibility to the user to choose which indicator he wants to consider.…”

Section: Sensitivity Analysismentioning

confidence: 99%

Desalination using renewable energy sources on the arid islands of South Aegean Sea

Mentis

Karalis

Zervos

et al. 2016

Energy

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a b s t r a c tWater and energy supply are strongly interrelated and their efficient management is crucial for a sustainable future. Water and energy systems on several Greek islands face a number of pressing issues. Water supply is problematic as regards both to the water quality and quantity. There is significant lack of water on several islands and this is mainly dealt with tanker vessels which transport vast amounts of water from the mainland. At the same time island energy systems are congested and rely predominantly on fossil fuels, despite the abundant renewable energy potential. These issues may be addressed by combining desalination and renewable energy technologies. It is essential to analyse the feasibility of this possibility. This study focuses on developing a tool capable of designing and optimally sizing desalination and renewable energy units. Several parameters regarding an island's water demand and the desalination's energy requirements are taken into account as well as input data which concern technological performance, resource availability and economic data. The tool is applied on three islands in the South Aegean Sea, Patmos (large), Lipsoi (medium) and Thirasia (small). Results of the modelling exercise show that the water selling price ranges from 1.45 V/m 3 for the large island, while the corresponding value is about 2.6 V/m 3 for the small island, figures significantly lower than the current water cost (7 e9 V/m 3 ).

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Technical Note—the Internal Rate of Return (Irr) as a Financial Indicator

Cited by 25 publications

References 16 publications

Environmental indicators for communication of life cycle impact assessment results and their applications

Environmental indicators for communication of life cycle impact assessment results and their applications

Average Internal Rate of Return and Investment Decisions: A New Perspective

Desalination using renewable energy sources on the arid islands of South Aegean Sea

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