A practical approach to the re-estimation of the economic internal rate of return of agricultural projects in project completion reports

Abstract

Techniques for re-estimating the economic internal rate of return of agricultural projects in Project Completion Reports are not well known. Firstly a base year for the re-estimation must be selected. Project cost andrevenue streams fallinto historical and projected data. For economic analysis, and to eliminate the effects of devaluation, historical data should be recalculated into current US dollar terms, using shadow exchange rates. The data may then be changed into constant base year terms using appropriate indices.

Projected costs are calculated in constant base year US dollars using a shadow exchange rate. The projected revenue stream should be calculated in current US dollars, the values being changed into constant base year terms using an appropriate index. Ignoring terminal values the historical and projected parts of the net benefit stream may be combined to derive the economic internal rate of return.

Keywords:

• agriculture
• internal rate of return
• project completion reports