IDEAS home Printed from https://ideas.repec.org/p/mop/credwp/08.02.73.html
   My bibliography  Save this paper

Capital budgeting with an efficient yield-based method: the real rate of return technique

Author

Listed:
  • Olivier ROUSSE

Abstract

We develop a yield-based capital budgeting method that solves the inconsistencies of the internal rate of return (IRR) and its alternatives with the shareholders' wealth maximization objective. We thus provide an efficient technique for managers who exhibit in practice a large preference for comparing the merits of projects with rates of return. This new method, called the real rate of return (RRR), is an improvement of the modified internal rate of return (MIRR) based on the Fisher equation. Simple and fitting with managers' needs and way of thinking, the RRR has all the qualities to be accepted in practice.

Suggested Citation

  • Olivier ROUSSE, 2008. "Capital budgeting with an efficient yield-based method: the real rate of return technique," Cahiers du CREDEN (CREDEN Working Papers) 08.02.73, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
    • Handle: RePEc:mop:credwp:08.02.73
    as

    Download full text from publisher

    File URL: http://www.creden.univ-montp1.fr/downloads/cahiers/CC-08-02-73.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ebl:ecbull:v:7:y:2008:i:9:p:1-8 is not listed on IDEAS
    2. Olivier Rousse, 2008. "On the bias of yield-based capital budgeting methods," Economics Bulletin, AccessEcon, vol. 7(9), pages 1-8.

    More about this item

    Keywords

    Capital budgeting; modified internal rate of return; net present value; profitability index; Fisher equation.;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mop:credwp:08.02.73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Olivier ROUSSE (email available below). General contact details of provider: https://edirc.repec.org/data/crmplfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.