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Math Help - Total Present Value of Income Flows

  1. #16
    Junior Member
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    Right, think ive finally got it,

    r = 1.14 and therefore project A net return on investment is 114%

    and for project B r = 1.24 and therefore the net return oin investment = 124% ?
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  2. #17
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    Those are indeed the projects' IRRs (told ya they were huge--I've got some investors who'd kill for a piece of that action; alas, such outsized returns are usually only found in the magical land of textbook-dom).

    But before you stamp this one "done", revisit what I said earlier: Check your text very carefully for its definition of "net return on investment". What you've done is to calculate the project's IRR, or 'yield', or ROR (rate of return), using a few common synonyms found in the biz.

    There are, though, instances of inconsistent terminology and variations in lingo in the finance game, so just make sure that "net return on investment" in your text doesn't refer to a concept that's different from our old pal IRR.

    Cheers!
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  3. #18
    MHF Contributor
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    No comments. Have a looksee here:
    Rate of return - Wikipedia, the free encyclopedia
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  4. #19
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    Thanks all, think ive finally cracked it, and solved it for the rate of return. Your help on this has been very much appreciated, so thanks again...got to crack on with some regression analysis...nasty...thanks again.
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  5. #20
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    Too bad you didn't answer my question about timing. "In the first year" can mean many things. I glad you found one you like. It is hoped the next ill-worded problem makes the same assumption.
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