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Possibilities Of Mirr Method Application For Evaluation Of Investments In Agriculture: An Example Of Pigs Fattening

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  • Ivanović, Sanjin
  • Nastić, Lana
  • Bekić, Bojana

Abstract

In the case of some agricultural investments, often net cash flow changes its sign from positive to negative, many times during the project. It causes the problem of internal rate of return calculation, which is an important indicator of economic effectiveness of investments. That is, in such situations, internal rate of return cannot be used. To solve this problem, modified rate of return is applied. This paper aimed to describe this method in detail, and to show its calculation for investments in pigs fattening. By application of modified internal rate of return it is determined that pigs fattening, under assumed conditions, is economically justified. Also, authors calculated the upper limit of discount rate (cost of capital), to which investment in pigs fattening is economically justified. It is concluded that, in the case of specific agricultural investments (such as pigs fattening), the use of traditional internal rate of return could give the wrong image on actual rate of return on investments.

Suggested Citation

  • Ivanović, Sanjin & Nastić, Lana & Bekić, Bojana, 2015. "Possibilities Of Mirr Method Application For Evaluation Of Investments In Agriculture: An Example Of Pigs Fattening," Economics of Agriculture, Institute of Agricultural Economics, vol. 62(2), pages 1-9, June.
    • Handle: RePEc:ags:iepeoa:206920
    DOI: 10.22004/ag.econ.206920
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    References listed on IDEAS

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    1. Gogić, Petar & Ivanović, Sanjin, 2013. "Economic And Financial Analysis Of Investments In Raspberry Plantations," 50th Anniversary Seminar, Agriculture and Rural Development -Challenges of Transition and Integration Processes, September 27, 2013 161824, University of Belgrade, Department of Agricultural Economics, Faculty of Agriculture.
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    Cited by:

    1. Souza, Sulma Vanessa & Gimenes, Régio Marcio Toesca & Binotto, Erlaine, 2019. "Economic viability for deploying hydroponic system in emerging countries: A differentiated risk adjustment proposal," Land Use Policy, Elsevier, vol. 83(C), pages 357-369.
    2. P, Prakash & Kumar, Pramod & Kishore, Prabhat & Jaganathan, D. & Immanuel, Sheela, 2021. "Economic Feasibility of Polyhouse Establishment with and without Government Subsidy Support: A Case of Gerbera Cultivation in Maharashtra, India," 2021 Conference, August 17-31, 2021, Virtual 314961, International Association of Agricultural Economists.

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