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The use of Npv and CAPM for capital budgeting is not a good idea. A reply to De Reyck (2005)

Magni, Carlo Alberto - MASTER CONSULTORES - 2009

disequilibrium values, is at odds with arbitrage theory, and that the corresponding CAPM-based NPV rule is meaningless even in the …, leaves decision makers open to arbitrage losses, because it is an (admittedly interesting) reframing of the security market … lineand (as surprising as it might be) the use of the SML for project valuation is incompatible with the no-arbitrage …

Persistent link: https://www.econbiz.de/10010762957

Ambiguita Nell´Applicazione del CAPM per la valutazione degli investimenti

Magni, Carlo Alberto - MASTER CONSULTORES - 2009

Il presente lavoro tratta del classico criterio di capital budgeting derivato dal CAPM,secondo il quale un investimento è conveniente se e solo se il suo tasso di rendimento atteso è maggiore del costo del capitale. Tale criterio è esposto, tra gli altri, da Rubinstein (1973) ed è...

Persistent link: https://www.econbiz.de/10010763038

A Quasi-IRR for a Project Without IRR

Magni, Carlo Alberto; Pressacco, Flavio; Stucchi, Patrizia - MASTER CONSULTORES - 2011

The internal rate of return (IRR) and the corresponding criterion has well-known difficulties of applicability and reliability. Among other problems, a project may have no real-valued IRR. The latter problem has been recently solved by Magni (2010a), who shows that, for any project, a unique...

Persistent link: https://www.econbiz.de/10010763019

Aggregate Return on Investment for Investments under Uncertainty

Magni, Carlo Alberto - MASTER CONSULTORES - 2014

This paper deals with with capital budgeting decisions under uncertainty. We present an Aggregate Return On Investment (AROI), obtained as the ratio of total (undiscounted) cash flow to total invested capital and show that it is a genuine rate of return which, compared with the risk-adjusted...

Persistent link: https://www.econbiz.de/10010827956

The Internal-Rate-of-Return approach and the AIRR paradigm: A refutation and a corroboration

Magni, Carlo Alberto - MASTER CONSULTORES - 2012

This paper shows that the Internal-Rate-of-Return (IRR) approach is unreliable, and that the recently introduced Average-Internal-Rate-of-Return (AIRR) model constitutes the basis for an alternative theoretical paradigm of rate of return. To this end, we divide the paper into two parts: a pars...

Persistent link: https://www.econbiz.de/10010762951

Accounting and economic measures: an integrated theory of capital budgeting

Magni, Carlo Alberto - MASTER CONSULTORES - 2009

average accounting rate generates a decision rule which is logically equivalent to the NPV rule for both accept …

Persistent link: https://www.econbiz.de/10010762964

On the long-standing issue of the internal rate of return: a complete resolution

Magni, Carlo Alberto - MASTER CONSULTORES - 2010

, different from the NPV ranking, (v)the IRR decision criterion is not applicable with variable costs of capital. Since the …

Persistent link: https://www.econbiz.de/10010762966

Mathematical Analysis of Average Rates of Return and Investment Decisions: The Missing Link

Magni, Carlo Alberto - MASTER CONSULTORES - 2014

general model of economic profitability for investment decision-making. Specifically, TRM's assumptions are relaxed and a …

Persistent link: https://www.econbiz.de/10010762989

Purely Internal Rate of Return and Investment Decisions: A Cash-Flow Perspective

Magni, Carlo Alberto - MASTER CONSULTORES - 2010

The recent notion of Average Internal Rate of Return (AIRR) [Magni 2010, The Engineering Economist, 55(2), 150-180] completely solves the long-standing problem of the internal rate of return (IRR). While the AIRR is a return measure, this paper presents a cash-flow measure, namely the ratio of...

Persistent link: https://www.econbiz.de/10010763060

Reasoning the `Net-Present-Value´ Way: Some Biases and How to Use Psychology for Falsifying Decision Models

Magni, Carlo Alberto - MASTER CONSULTORES - 2010

-minded decision makers are observed and analyzed. As a result, one finds out that the NPV methodology is biased and its decision …

Persistent link: https://www.econbiz.de/10010763065