Standard Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and Building Systems

Importancia y uso:

5.1 The IRR method has been used traditionally in finance and economics to measure the percentage yield on investment.

5.1.1 The IRR method is appropriate in most cases for evaluating whether a given building or building system will be economically efficient, that is, whether its time-adjusted benefits will exceed its time-adjusted costs over the period of concern to the decision-maker. However, it has deficiencies that limit its usefulness in choosing among projects competing for a limited budget.

5.2 The AIRR method is a measure of the overall rate of return that an investor can expect from an investment over a designated study period. It is appropriate both for evaluating whether a given building or building system will be economically efficient and for choosing among alternatives competing for a limited budget.

5.2.1 The AIRR method overcomes some, but not all, of the deficiencies of the IRR. The AIRR is particularly recommended over the IRR for allocating limited funding among competing projects.

Subcomité:

E06.81

Referida por:

E1121-15R20E01, E1185-15R20E01, E3200-21, E0917-17R23, E1369-15R20E01, E1074-15R20E01, E3130-21, E0964-15R20E01, E2204-15R20E01, E2103_E2103M-19R24, E2506-15R20E01, E1765-16R23, E1557-09R24, E3008_E3008M-16R23

Volúmen:

04.11

Número ICS:

91.010.20 (Contractual aspects)

Palabras clave:

adjusted internal rate of return; building economics; discounting; economic evaluation methods; engineering economics; internal rate of return; net benefits; net savings; overall rate of return; payback; savings-to-investment ratio; terminal value ;