Abstract: ABSTRACT This paper introduces a new method of capital project analysis called the perpetuity rate of return (PRR). As implied by its name, the PRR is found by transforming a project's cash flow stream into a perpetuity and then relating this value to the required investment outlay. The PRR method is essentially a compromise between the NPV and IRR techniques. Like the NPV, the PRR correctly values a project's cashflows by using the market-determined cost of capital as the discount rate; like the IRR, the PRR is a rate of return that is appropriately compared to the cost of capital to determine a project's acceptability. The new yield-based method fares well in comparison with the IRR on a conceptual level and appears to have practical potential.
Publication Year: 1991
Publication Date: 1991-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 10
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