ADDENDUM TO 'AVERAGE INTERNAL RATE OF RETURN AND INVESTMENT DECISIONS: A NEW PERSPECTIVE'

摘要

1. Return function. In Magni (2010) I present the average internal rate of return (AIRR) approach to investment decisions. This approach shows a radical truth: a project is not uniquely associated with a return rate but with a return junction, which maps aggregate capitals to rates of return; it is an aggregate capital PV(c | r) that is associated with a unique return rate (the AIRR; see Figure 1 in the paper). 2. Definition of rate of return. The AIRR approach enables any real number to be a rate of return, associated with a specific aggregate capital. In other words, any given number is a value taken on by the return function. This implies a radical epistemological consequence: as long as real numbers are used for denning a rate of return, any definition of rate of return appearing in the (past and) future literature is a particular case of AIRR.