English, Article, Journal or magazine article edition: Deriving the Internal Rate of Return from the Accountant's Rate of Return: A Simulation Testbench Timo Salmi; Ilkka Virtanen; ts@uwasa.fi; ...

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/142601
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Deriving the Internal Rate of Return from the Accountant's Rate of Return; A Simulation Testbench
Author
  • Timo Salmi
  • Ilkka Virtanen
  • ts@uwasa.fi
  • itv@uwasa.fi
Physical Description
  • preprint
Notes
  • RePEc:wop:vaabuf:_001
  • This paper presents a realistic simulation testbench for evaluating the various methods for estimating the long-term profitability of business firms in terms of the internal rate of return (IRR) of their capital investments. The simulation model extends the earlier, rigid approaches by incorporating business cycles and capital investment shocks. Kay's IRR estimation method is used to demonstrate the usage of the improved simulation approach. When the growth rate and profitability are near each other, Kay's method yields accurate estimates as expected by theory. The more growth and profitability differ the less accurate will the estimates be. The magnitude (and even the direction) of the error depends on the depreciation method applied and the capital investments' contribution distribution. It is also seen that Kay's method is insensitive to full business cycles, but disrupted by excessive capital investment shocks.
  • Long-term profitability, accountant's rate of return, internal rate of return, Kay's IRR estimation model, simulation.
  • RePEc:wop:scfiab:_006
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment