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Anomalies in net present value calculations. A solution

  • Joan Pasqual Rocabert

    ()

    (Universidad Autónoma de Barcelona)

  • José Antonio Tarrío

    (Universidad de Barcelona)

  • María José Pérez

    (Universidad Carlos III de Madrid)

The so-called anomalies that arise in the computation and interpretation of the Net Present Value (NPV) and the Internal Rate of Return (IRR) can be easily overcome if the properties of the NPV function are taken into account and it is clearly defined what is an investment and what is a credit. All the roots of the NPV function have economic meaning and, when there is at least one IRR, the NPV and the IRR criteria agree.

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File URL: http://www.ief.es/documentos/recursos/publicaciones/revistas/hac_pub/173_Anomalies.pdf
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Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 173 (2005)
Issue (Month): 2 (June)
Pages: 47-60

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Handle: RePEc:hpe:journl:y:2005:v:173:i:2:p:47-60
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  1. Oehmke, James F., 2000. "Anomalies in net present value calculations," Economics Letters, Elsevier, vol. 67(3), pages 349-351, June.
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