The Financial Attractiveness of a Project: A Method of Assessing it

Abstract

A generalization of the Discounted Cash Flow method of measuring return on investment is shown to provide a well-defined and useful measure for all cash flow series which can be regarded as relating to an investment project. Problems of multiple solutions and of inadmissible implicit assumptions that can arise with the standard DCF method are thus overcome, while the essential features of the method are retained. In a large proportion of cases met in practice the generalized procedure reduces to the standard one. The possibility of a time-dependent cost of capital is included in the analysis.