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Teaching Net Present Value Analysis: Returns-to-Assets versus Returns-to-Equity

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  • Stephen E. Miller
  • Garnett L. Bradford

Abstract

We surveytextbooks from agricultural economics and other subject matter areas to determine their treatments of the returns-to-assets versus returns-to-equitymethods for determining the net present value of investment projects. Textbook authors disagree about the appropriate method, often give conflicting advice as to how a given method should be applied, and do not show how the results of the two methods can be reconciled. We provide a consolidated discussion of the circumstances under which the two methods produce the same net present value.

Suggested Citation

  • Stephen E. Miller & Garnett L. Bradford, 2001. "Teaching Net Present Value Analysis: Returns-to-Assets versus Returns-to-Equity," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 223-241.
    • Handle: RePEc:oup:revage:v:23:y:2001:i:1:p:223-241.
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    File URL: http://hdl.handle.net/10.1111/1058-7195.00057
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