Abstract
This paper examines the economic content of the positive net present value of a project type that is loss-making and has two internal rates of return. The most important finding is that the economic content of a positive net present value is false in such cases. The financial source of the missing amount to reach the level of business efficiency is a false interest income generated by the method. In such cases, the two internal rates of return are also derived from false interest income. The revealed and mathematically proved causality relationships usually prevail in some form in the case of other types of non-conventional cash flows as well.
Highlights
The literature does not address the economic content of the net present value (NPV)
The NPV is the sum of the surplus profit generated above the required one, discounted for the present time (Illés 1990, 2012).The critical NPV value for business efficiency is zero
The economic content of the NPV is usually confused in the case of non-conventional investment projects
Summary
This content is clear only in the case of conventional (typical) investment projects In this case, the NPV is the sum of the surplus profit generated above the required one, discounted for the present time (Illés 1990, 2012).The critical NPV value for business efficiency is zero. The NPV is the sum of the surplus profit generated above the required one, discounted for the present time (Illés 1990, 2012).The critical NPV value for business efficiency is zero At this point, the payback requirement is met, because here all expenditures and the sum according to the required rate of return are returned. This means that there are special projects that do not repay even the nominal value of the invested capital; according to the NPV rule, these are appropriate (Illés 2016)
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