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In business and for engineering economics in both industrial engineering and civil engineering practice, the minimum acceptable rate of return, often abbreviated MARR, or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other projects. [1]
Real options valuation, also often termed real options analysis, [1] (ROV or ROA) applies option valuation techniques to capital budgeting decisions. [2] A real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. [3]
The rate of return on a portfolio can be calculated indirectly as the weighted average rate of return on the various assets within the portfolio. [3] The weights are proportional to the value of the assets within the portfolio, to take into account what portion of the portfolio each individual return represents in calculating the contribution of that asset to the return on the portfolio.
The 5% ETL and 5% ETR of a non-Gaussian return distribution. Although the most probable return is positive, the Rachev ratio is 0.7 < 1, which means that the excess loss is not balanced by the excess profit in the investment. In the ex-post analysis, the Rachev ratio is computed by dividing the corresponding two sample AVaR's. Since the ...
An annual rate of return is a return over a period of one year, such as January 1 through December 31, or June 3, 2006, through June 2, 2007, whereas an annualized rate of return is a rate of return per year, measured over a period either longer or shorter than one year, such as a month, or two years, annualized for comparison with a one-year ...
The accounting rate of return, also known as average rate of return, or ARR, is a financial ratio used in capital budgeting. [1] The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return.
Thus, internal rate(s) of return follow from the NPV as a function of the rate of return. This function is continuous. Towards a rate of return of −100% the NPV approaches infinity with the sign of the last cash flow, and towards a rate of return of positive infinity the NPV approaches the first cash flow (the one at the present).
Rate of return pricing or target-return pricing is a method by which a company will set the price of its product based on their desired returns on said product. [1] The concept of rate return pricing is very similar to return on investment, but in this circumstance the company can manipulate its prices to achieve the desired goal.