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Anomalies in net present value calculations. A solution

Author

Listed:
  • Joan Pasqual Rocabert

    (Universidad Autónoma de Barcelona)

  • José Antonio Tarrío

    (Universidad de Barcelona)

  • María José Pérez

    (Universidad Carlos III de Madrid)

Abstract

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.

Suggested Citation

  • Joan Pasqual Rocabert & José Antonio Tarrío & María José Pérez, 2005. "Anomalies in net present value calculations. A solution," Hacienda Pública Española / Review of Public Economics, IEF, vol. 173(2), pages 47-60, June.
    • Handle: RePEc:hpe:journl:y:2005:v:173:i:2:p:47-60
    as

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    References listed on IDEAS

    as
    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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    Cited by:

    1. Pasqual, Joan & Padilla, Emilio & Jadotte, Evans, 2013. "Technical note: Equivalence of different profitability criteria with the net present value," International Journal of Production Economics, Elsevier, vol. 142(1), pages 205-210.

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    More about this item

    Keywords

    Net Present Value; Internal Rate of Return; Investment Analysis; Project Evaluation.;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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