Gu Zheng, Nan Zhe, Zhang Shuangying
State Grid Liaoning Electric Power CO, LTD. Power Electric Research Institute, Shenyang, Liaoning110015, China
The internal rate of return IRR is an important indicator in the economic evaluation method of power engineering projects, and it is widely used. However, due to the complex calculation of IRR and the uncertainty of the solution in unconventional projects, some scholars suggest using the external rate of return ERR instead of IRR. In fact, this is a misunderstanding. Through the "reinvestment theory", "computational complexity", "existence and uniqueness of solutions" and other aspects, detailed analysis and specific examples point out the misunderstanding of replacing IRR with ERR, and the argument is also Affirmed the significance of the existence of IRR. The calculation method of IRR was improved, and the iterative interpolation method was obtained. In non-conventional projects, the modified internal rate of return method MIRR can also be used to make up for the indispensable shortcomings of IRR.
Reinvestment theory; iterative interpolation
Gu Zheng, Nan Zhe, Zhang Shuangying. Discrimination and Analysis of Misunderstandings in Power Engineering Project Economic Evaluation. Academic Journal of Business & Management (2020) Vol. 2, Issue 5: 120-124. https://doi.org/10.25236/AJBM.2020.020513.
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