On the Rate of Return and Valuation of Non-Conventional Projects

This paper provides a solution for evaluating non-conventional projects, firstly showing that the well-known modified internal rate of return does not correctly answer what investors want to measure. Even if one correctly uses the net present value criterion for capital budgeting, we show that it fails for non-conventional projects. Our contribution is thus twofold: To yield the correct rate of return for non-conventional projects and to allow practitioners to correctly calculate comparable net present values to take correct investment decisions.