Mechanical Ventilator Acquisition Strategy in a Large Private Tertiary Medical Center Using Monte Carlo Simulation.

MIRR: A better measure

This study aimed to study capital budgeting for purchasing trailer projects to use with piling work, a case study of Roi-Et Prestressed Concrete Co., Ltd, in addition to comparing and summarizing the options between investment in purchasing trailers and hiring independent contractors (outsourcing). It utilized financial theories to consider the free cash flow and the weighted average cost of capital (WACC) and then determine the net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), payback period, discounted payback period and sensitivity study. The investment and financial management plan involved an investment cost of 3,550,000 baht, with 532,500 baht from the owner's equity and 3,017,500 baht from a financial institution loan. The WACC is 4.21%. The capital budgeting analysis based on financial theories revealed that the NPV of hiring independent contractors (outsourcing) was higher than the NPV of investment in purchasing trailers. Hiring independent contractors (outsourced) has an NPV of 8,813,386.51 baht, while the investment in purchasing trailers had an NPV of 5,997,712.07 baht. the IRR was 89.9%, and the MIRR was 34.4%. The payback period was 1.17 years, and the discounted payback period was 1.247 years. The sensitivity analysis showed that the worst-case scenario of hiring independent contractors NPV is 7,007,043.61 baht, and the worst-case scenario of investment in purchasing trailers NPV is 3,596,104.38 baht. As a result of the analysis, it can be concluded that Roi-Et Prestressed Concrete Co., Ltd. should invest in hiring independent contractors (outsource) because it has the highest net present value (NPV).

Whether a project is viable, determining whether a project is viable requires some metrics. The indicators that are most frequently utilized are the Net Present Value (NPV) and the internal rate of return (IRR). They are very representative and scientific. The same decision can be made by applying both in independent and non-independent projects When there are many contradictions between NPV and IRR, it is necessary to introduce new indicators to continue to judge the project, such as △IRR, incremental IRR method, modified IRR (MIRR) method, selective IRR method, payback period method, Equivalent Annual Annuity (EAA) method and static analysis method. The investment is selected by comparing the internal rate of return △IRR with the benchmark rate of return (ic) or the social discount rate. The MIRR approach determines the IRR of each scheme, compares it to ic, chooses the scheme that have IRR is larger than or the same as ic, and then determines the incremental IRR of the two neighboring schemes to make the choice. In addition to the investment payback period approach and the selective internal rate of return method. EAA method is in the comparison of investment projects, investors should choose the project with higher EAA when comparing. In the process of investment projects, different enterprises can adopt static analysis method to carry out project investment, but there are two forms of static analysis method, such as payback period method and basic income method. Using reasonable indicators and methods to evaluate the investment project, so as to select the best project.

Much has been written in finance textbooks and scholarly publications about the capital budgeting methods derived from Discount Cash Flow (DCF) models: Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR) and Profitability Index (PI). However, there is a divergent understanding about the role of the reinvestment rate assumption in some of these models. In this paper I will discuss a number of issues regarding the assumption of the reinvestment rate and clarify its correct usage. This discussion will naturally lead to the Modified Internal Rate of Return as the only method where a reinvestment rate assumption makes sense. In addition, for the first time in the literature I will propose a method of determining if the NPV and MIRR will produce conflicting decisions in advance of the MIRR computation. The literature has a clear method to determine if the there is a conflict between NPV and IRR but no method for the NPV-MIRR conflict is described. Interestingly the Profitability Index will have a role in determining if the NPV and MIRR are in conflict. The paper is useful to all those who teach the topic of capital budgeting in corporate finance courses of any level.

Much has been written in finance textbooks and scholarly publications about the capital budgeting methods derived from Discount Cash Flow (DCF) models: Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR) and Profitability Index (PI).However, there is a divergent understanding about the role of the reinvestment rate assumption in some of these models.In this paper I will discuss a number of issues regarding the assumption of the reinvestment rate and clarify its correct usage.This discussion will naturally lead to the Modified Internal Rate of Return as the only method where a reinvestment rate assumption makes sense.In addition, for the first time in the literature I will propose a method of determining if the NPV and MIRR will produce conflicting decisions in advance of the MIRR computation.The literature has a clear method to determine if the there is a conflict between NPV and IRR but no method for the NPV-MIRR conflict is described.Interestingly the Profitability Index will have a role in determining if the NPV and MIRR are in conflict.The paper is useful to all those who teach the topic of capital budgeting in corporate finance courses of any level.

Economic viability for deploying hydroponic system in emerging countries: A differentiated risk adjustment proposal

The theoretical aspects of company’s investment management are discussed. The properties and characteristics of seven main economic criteria-indicators of investment projects, in particular, net present value, profitability index, simple and modified internal rate of return, simple and discounted payback period, efficiency coefficient are considered in detail. The aim of the study is a critical comparative analysis of the most important economic criteria of the company’s investment projects, such as internal rate of return (IRR) and modified internal rate of return (MIRR), their advantages and disadvantages, as well as further development of objective theoretical ideas about properties and relationships criteria for future investments, in particular, between the profitability index (PI) and the modified internal rate of return (MIRR).The economic and mathematical properties of the function describing the dependence of the net present value on the value of the discount rate are studied. The attention of project analysis specialists and top managers of companies is drawn to the shortcomings of the internal rate of return, which, in certain cases, due to the peculiarities of the calculation carries a potential threat of artificially overestimating the efficiency of an investment project. This fact is a significant basis for a complete rejection of using this indicator as a quantitative characteristic of the effectiveness of future production and financial projects. It is proposed to use exclusively the criterion «modified internal rate of return» as an indicator of efficiency of an investment project, which is completely objective, universal and can serve as a basis for calculating the profitability index. A formula of the functional interrelation between the value of the modified internal rate of return and the profitability index of the future production and financial projects of the company is derived.

PurposeThe purpose of this paper is to contribute to financial managers’ capital budgeting decision-making processes by proposing a new paradigm of capital investment appraisal. The expected return, required return structure of the proposed purchasing power return (PPR) methodology eliminates the many flaws associated with the competing internal rate of return (IRR) and modified IRR (MIRR) techniques.Design/methodology/approachThe authors provide a new framework for examining long-term investment projects through a percentage return prism. Unlike that of IRR and MIRR, mathematical consistency with net present value (NPV) is a design requirement.FindingsPPR eliminates the many flaws found in the IRR and MIRR methodologies, is mathematically consistent with NPV, and identifies positive-NPV investments forecasted to reduce the company’s purchasing power. These projects are acceptable under NPV, but flagged for additional review and potential rejection. Created to examine projects on a percentage return basis, PPR employs market-based inflation rates to convert all cash flows into constant purchasing power units of measure. From these units, an expected real return is estimated and compared to the project’s inflation-adjusted required return, resulting in an accept/reject decision consistent with that of NPV.Originality/valueThe proposed PPR is a new paradigm of capital investment appraisal that eliminates the many problems found in the IRR and MIRR techniques, is mathematically consistent with the NPV method, and helps financial decision makers examine investment projects on an expected percentage return basis. PPR also flags for further review projects expected to actually reduce the company’s purchasing power.

The purpose of the article is to determine the system of indicators for assessing the effectiveness of hotel enterprises. It is determined that the main criterion of the value of the investment project is the criterion of net discounted income. It is noted that the modified internal rate of return (MIRR) eliminates the lack of internal rate of return of the project, which occurs in the case of repeated outflows. It is noted that today there is no single approach to assessing the effectiveness of investment in hotel enterprises in accordance with the forms of ownership and their size, which is due to the need to ensure compliance with performance evaluation criteria and a system of indicators. Statistical and dynamic indicators of investment evaluation are considered Indicators are analyzed: simple (accounting) rate of return on the project (ARR), payback period (PP) Performance indicators taking into account the time factor are considered: discounted payback period (DPP), net discounted income (NPV), discounted profitability index (DPI), internal rate of return (IRR) and some others. The disadvantage of the discounted payback period has been identified - it does not take into account subsequent cash inflows, and therefore may serve as an incorrect criterion for the attractiveness of the project. The main advantages of static and dynamic indicators of investment project efficiency assessment are determined. It is noted that one of the main criteria of investment advantage of a project is profit maximization. Break-even analysis allows you to calculate the volume of sales at which the company's income equals costs. It is proposed to use the indicator modified internal rate of return (MIRR) It is determined that the most popular methods of assessing the effectiveness of the investment project today are the definition of such static indicators as simple rate of return, simple payback period and dynamic indicators, namely: discounted payback period, net present value, profitability index, internal rate of return and modified internal rate profitability. The most accurate results are given by dynamic indicators, as they take into account the value of money over time. Although dynamic methods are more accurate, all the considered methods of evaluating the effectiveness of the investment project have their pros and cons.

Given the demand for sustainable and cost-effective manure management in livestock systems, this study evaluated the economic feasibility of cattle manure treatment via composting and anaerobic digestion (AD) under different configurations. Five scenarios were compared: composting without solid–liquid separation, AD without separation at 20- and 30-day hydraulic retention times (HRTs), and combined systems with separation, composting the solid fraction and digesting the liquid. The analysis was based on a 200-cow herd and experimental data, with 15-year projected cash flows. Economic indicators included net present value (NPV), internal rate of return (IRR), discounted payback period (DPP), benefit–cost ratio (B/C), modified internal rate of return (MIRR), uniform annual equivalent (UAE), and profitability index (PI), supported by sensitivity analysis and Monte Carlo simulation. All scenarios were viable and posed low risk. Energy and fertilizer value were key drivers. The scenario 30-day HRT without separation had the best financial performance (NPV = 53,407.15 USD; IRR = 15.54%; DPP = 7.33 years; B/C = 1.57; MIRR = 9.28%; UAE = 5654.48 USD; PI = 1.66) and is recommended for capitalized farms seeking higher returns. Composting had lower returns (NPV = 9832.06 USD) but required the lowest investment, remaining a cost-effective alternative for smallholders.

There are several techniques that are used in practice to evaluate capital budgeting proposals. These include the payback and discounted payback techniques, net present value technique, profitability index technique, internal rate of return technique, and modified internal rate of return technique. While used in practice, some of these techniques are limited in their ability to help managers identify proposed capital projects that are profitable and are not necessarily consistent with maximization of shareholder wealth. Moreover, where capital rationing exists, some techniques give conflicting rankings of the relative attractiveness of capital projects. Keywords: capital budgeting techniques; net present value (NPV); internal rate of return (IRR); payback period; discounted payback period; modified internal rate of return (MIRR); profitability index; mutually exclusive projects; independent projects; capital rationing; cost of capital; required rate of return (RRR); crossover discount rate; hurdle rate

부동산투자 패러다임의 변화 속에서 정교하고 투명하게 투자가치와 성과를 분석할 수 있는 기법의 도입이 절실히 필요하게 됐다. 본 연구에서는 합리적이고 타당한 투자의사결정을 하기 위하여 신뢰도 높은 투자가치분석의 핵심이 되는 재무적 타당성 분석방안을 찾고자 한다. 이를 위해 부동산 개발사업 사례와 자산관리사업 사례를 선정했다. 각 사례를 통해 손익이나 투자가치를 어떻게 분석했으며 변수에 따라 수익률과 현재가치가 어떻게 변화하는지 과정을 추적했다. 분석 결과, 기존에 발달해 온 여러 기법들을 실제 개발프로젝트에 직접 적용하기 위해서는 우선 해당 프로젝트에서 의사결정을 위해 가장 중요시되는 부분이 무엇인지 파악한 다음 여러 투자분석 기법들 가운데 가장 적절한 기법들을 복수로 선정한 뒤 각 투자분석기법의 단점을 보완할 수 있도록 대체적 및 보완적 기법들을 동원해 실제 투자가치분석에서 활용한다면 투자가치분석의 효율성과 신뢰성을 높일 것이라는 점을 발견했다. 【In so many real estate development projects, there were strong needs to have a powerful tool to check feasibility of those projects. But there were not enough tool and measure to cover risk of real estate development and construction. Therefore I tried to find a real tool to measure investment value of development properly and efficiently, by means of case studies of many real estate development projects. Finally I found a fact that no tools of investment value analysis are perfect and efficient to hedge all kinds of risks in projects. Especially NPV(Net Present Value) and IRR(Internal Rate of Return) were not sufficient by themselves to measure investment value. So I found out that MIRR(Modified IRR), XIRR(X-IRR), ARR(Average Rate of Return), PP(Payback Period) and so on, would be supplementaries of proper and efficient investment value analysis.】

This article demonstrates that the Internal Rate of Return (IRR) has several controversial points for which no solution is in sight. As will be shown in most cases, the IRR does not represent a correct measure of return on investment. The IRR only represents the return on invested capital in those cases where there are conventional flows characterized by an initial outlay and final receipt. These flows are typical of certain financial applications, but rare in the scope of production and operations projects. Intermediary cash flows that occur with great frequency in projects in these areas strip IRR of its condition as a means to measure the return on investment. The objective of this study is to offer a more appropriate interpretation of the multiple rates of return phenomena that may be found in unconventional cash flows and validate the modified internal rate of return (MIRR) as a more acceptable indicator to estimate the rate of return for a conventional investment project. In conclusion, the article shows that for certain unconventional cash flows in which there are multiple solutions for the IRR, even the MIRR is in need of financial meaning. Keywords: Economic Engineering; project evaluation; cash flow analysis; internal rate of return; rate of reinvestment; modified internal rate of return.

Assessing project profitability using Net Present Value (NPV), Internal Rate of Return (IRR), and Modified Internal Rate of Return (MIRR) is a common practice. However, these metrics often overlook key differences between new and existing projects, leading to potential data uncertainty and the failure to capture the complex interrelationships among influencing factors. This paper introduces data envelopment analysis (DEA) as a supplementary tool to identify the most efficient year within a project’s lifecycle, optimize inputs and outputs, and evaluate the factors most impacting the efficiency of decision-making units (DMUs). By optimizing these values, the paper reexamines NPV, IRR, and MIRR to allow for a comparison with the original assessment. If profitability improves, the project becomes more attractive, with the modified inputs and outputs serving as the new benchmark. A case study of a non-viable road project demonstrates this approach. While NPV, IRR, and MIRR showed improvement, the project remained unappealing under optimal conditions. Additionally, a simulated dataset, based on case study parameters, revealed enhanced profitability and new project viability when analyzed. With revised input and output values, the project’s appeal and viability were significantly improved.

This article considers evaluation of nonconventional projects and projects with cash outflows occurring not only at the beginning of project. It has been proved that, being a monotonically increasing function of a discount or finance rate, the modified internal rate of return (MIRR) fails to characterize the rate of return of such projects. We showed how to eliminate the MIRR's dependence on a finance rate and proved that in this case the MIRR becomes the “equivalent rate of return” proposed by Solomon. The generalized internal rate of return (GIRR) and generalized external rate of return (GERR) indices based on the generalized net present value (GNPV) approach are considered as alternatives to the MIRR. Several nonconventional projects have been evaluated using the MIRR, GIRR, and GERR rules. In order to verify the estimates, we drew up a simple project balance sheet, which demonstrated correctness of the results based on the GIRR and GERR rules and errors inherent in the MIRR application.