Marcin Borkowski
On some measures of efficiency of financial projects
A classic – and the most well-known – measure of efficiency of financial
projects is the net present value (NPV). However, it has certain issues
connected with choosing the “right” discount rate. In the paper by
Teichroew et al. (1965) it was shown how to compute net future value
using two rates: one for financing and one for reinvesting. The authors
mention how to use their method to compute an analogue of the NPV.
Unfortunately, their method is wrong. The first part of the talk will
be devoted to showing their error and comparing their method to
a correct one due to A. Kulakova (2010). Then, we will prove a number
of properties of the generalized net present value defined by the latter
author.