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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
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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
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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
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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
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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
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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
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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
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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
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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
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Generalized Makeham's Formula and Economic Profitability
Magni, Carlo Alberto - MASTER CONSULTORES - 2013
AVR, which has the same sign as the Net Present Value. This makes (i) AIR a more reliable tool for valuation and decision …This paper generalizes Makeham’s formula, allowing for varying interest rates and for a non-flat structure of valuation … rates. An average interest rate (AIR) is introduced, as well as an average valuation rate (AVR), which exist and are unique …
Persistent link: https://www.econbiz.de/10010763070