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Transforming the Net Present Value for a Comparable One

Author

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  • Mária Illés

    () (University of Miskolc)

Abstract

This study examines the nature of net present value. It defines the economic content of the net present value and mathematically proves that definition is correct. This economic content inducts that the net present values are not comparable. The study systematically eliminates the distortion affects. The net present value transforms into a special kind of rate, namely, the modified difference between the factual and the required rate of return. The ranking list according to this transformed net present value corresponds to the list according to the internal rate of return. This is a new cognition and a very important correspondence.

Suggested Citation

  • Mária Illés, 2012. "Transforming the Net Present Value for a Comparable One," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 8(01), pages 24-32.
  • Handle: RePEc:mic:tmpjrn:v:8:y:2012:i:01:p:24-32
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    File URL: http://tmp.gtk.uni-miskolc.hu/volumes/2012/01/TMP_2012_01_04_Illes_Maria.pdf
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    References listed on IDEAS

    as
    1. Kierulff, Herbert, 2008. "MIRR: A better measure," Business Horizons, Elsevier, vol. 51(4), pages 321-329.
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    More about this item

    Keywords

    business economics; capital budgeting decisions; net present value; internal rate of return; ranking; economic efficiency;

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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