ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

L C GuptaSubscribe to L C Gupta

Net Present Value versus Internal-Rate of Return-Further Comment

Net Present Value versus Internal IN his reply to my comment (February 26, pp M-43-47), Paul Mampilly is right when ho states that the evaluation of an investment proposition should bo made on the basis of "the net change, increment or decrement, that particular proposition causes to the total finances of an investor over a chosen horizon of time", and that account mast be taken not only of what he calls 'primary flows' but also of the 'secondary flows' arising from re-investment of the primary flows. Mampilly argues at length that the reinvestment rate should be take into account for the purpose of investment evaluation and uses this argument as his main justification for the contention that the Internal Rate of Return (IRR) method implicitly assumes a re-invest- inent rate equal to the IRR itself. However, to argue that the actual re-investment rate should be taken into account for decision purposes is one thing; to say that a particular re-investment rata is implicit in the IRR method is quite another.

Net Present Value versus Internal Rate of Return-A Comment

Rate of Return A Comment Let us see whether the IRR calculations depend in any way on the reinvestment assumption which they regard as crucial: Project A IN 'Net Present Value versus Internal Rate of Return' (November 27, 1971, pp M-153-6), Rangarajan and Mampilly express the view that while both the Net Present Value (NPV) and the Internal Rate of Return techniques have an underlying implicit assumption about re-investment of the cash flows generated during the life-time of a project, the main difference between them lies in assuming different re-investment rates. To quote them:

Criteria for Evaluation of Capital Projects

tional recognition. Scientists in this category gather experience as they move irnm organisation to organisation. As they grow old they tend to identify themselves with one organisation. At. this stage they require recognition as a motivating force to commit them to organisational goals, In the ease of new entrants, recognition is very important as it helps them to establish themselves.

Corporate Policies on Bonus Share Issues in India

L C Gupta Bonus issues in India are in the nature of 'stock-splits' rather than 'stock-dividends'. Increases in the total quantum of dividend distribution do not follow bonus issues quite as universally or automatically as is generally assumed. In fact, where dividend distribution has been increased, the quantum of increase has been usually less than in proportion to the bonus issue.

Surface View

and participation us a citizen in a wider social life, but due to the constraints of the pattern of family relationship is forced to accept a traditional role? It is surprising that Promilla Kapur, who as a sociologist should have elaborated upon the sociological implications of this phenomenon somehow ignores even asking these questions. How long can such conformity last? In spite of compliance on the part of wives, are there not many situations which will compel them to violate this norm? Will not the present institutional framework of the family become a growing irritant to wo- mm who are struggling to become equal partners? Instead of asking these questions, Promilla Kapur directs her gaze in a totally different direction. She says, "An attitudinal lag occurs, when the attitudes of one of the spouses forming the unit of marital relationship change earlier or in greater degree than those of the other spouse and thus cause lack of fit between their attitudes".


Back to Top