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Uniqueness of non-negative internal rate of return

Published online by Cambridge University Press:  20 April 2012

Allen M. Russell  and
John A. Rickard
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Extract

We will be considering a productive investment project or financial security which yields a sequence of cash flows, positive or negative, over time. Let a1 (dollars) be the cash flow from the project at time t, where t takes the values 0, 1, 2,…, n. Given the known cash flows at from the project, and a known market rate of interest, i per period, at which money may be borrowed or invested, a common procedure is to accept the project if its present value P is greater than zero, where

An internal rate of return of the project is defined to be a solution of the equation

in (− 1, ∞), if, of course, one exists.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 109 , Issue 3 , December 1982 , pp. 435 - 445
Copyright
Copyright © Institute and Faculty of Actuaries 1982

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References

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