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The Positive Net Present Value of Loss-making Projects: Economic Content of the Two Internal Rates of Return

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  • Mária Illés

    (University of Miskolc)

Abstract

This paper examines the economic content of the positive net present value of a project type that is loss-making and has two internal rates of return. The most important finding is that the economic content of a positive net present value is false in such cases. The financial source of the missing amount to reach the level of business efficiency is a false interest income generated by the method. In such cases, the two internal rates of return are also derived from false interest income. The revealed and mathematically proved causality relationships usually prevail in some form in the case of other types of non-conventional cash flows as well.

Suggested Citation

  • Mária Illés, 2020. "The Positive Net Present Value of Loss-making Projects: Economic Content of the Two Internal Rates of Return," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 16(02), pages 41-50.
    • Handle: RePEc:mic:tmpjrn:v:16:y:2020:i:02:p:41-50
    as

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    File URL: http://tmp.gtk.uni-miskolc.hu/volumes/2020/02/TMP_2020_02_04.pdf
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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