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Chapter 7: Rate of Return One Project

The document discusses calculating and interpreting the rate of return (ROR) for cash flow series and investments. It explains how to determine multiple ROR values, including the external rate of return (EROR) and interest rates for bonds. The ROR is the rate paid on unpaid balances or earned on unrecovered investment balances so that the final payment brings the balance to zero. The ROR can be written in terms of present, annual, or future worth and can range numerically from negative 100% to infinity.

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Zulfiqar Ali
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27 views6 pages

Chapter 7: Rate of Return One Project

The document discusses calculating and interpreting the rate of return (ROR) for cash flow series and investments. It explains how to determine multiple ROR values, including the external rate of return (EROR) and interest rates for bonds. The ROR is the rate paid on unpaid balances or earned on unrecovered investment balances so that the final payment brings the balance to zero. The ROR can be written in terms of present, annual, or future worth and can range numerically from negative 100% to infinity.

Uploaded by

Zulfiqar Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 7: Rate of Return One Project

• Understand meaning of ROR


• Calculate ROR for cash flow series
• Understand difficulties of ROR
• Determine multiple ROR values
• Calculate External ROR (EROR)
• Calculate r and i for bonds
Interpretation of ROR
• Rate of return (ROR) is the rate paid on the unpaid balance of
borrowed money, or the rate earned on the unrecovered balance of
an investment, so that the final payment or receipt brings the
balance to exactly zero with interest considered.
• ROR equation can be written in terms of PW, AW, or FW.
• Numerical value can range from -100% to infinity. (In terms of an
investment, a return of i =100% means the entire amount is lost).
Example
Example
Example
Example

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