Rate or Return (ROR) Calculation

The Rate Of Return in Value Navigator is based on Internal Rate of Return calculations. The maximum limit for ROR is 500%. In between 500 and 1000, the display is ">500". N/A may appear if the ROR is negative, exceeds 1000%, or if there are multiple calculations for ROR (BTCash flow changes signs too many times). N/A in this case means that Value Navigator cannot calculate the ROR. You may see the N/A if the case is using acceleration economics, or if the economic limit is not enabled. You can look at the ROR as equivalent to the XIRR calculation in Excel.

Value Navigatoruses an iterative approach (a form of the standard Newton's method) to solve for the ROR that returns a discounted NPV of 0. There are a few conditions that are used. 1. If the cash flow changes sign more than once then multiple roots may exist -- depending on the assumptions and specifics of the algorithm, different results may occur. 2. We calculate the ROR to a certain tolerance -- once our solution finds that the ROR is changing by less than a certain amount between iterations (0.005) we assume we have a solution. 3. If we haven't found a solution after a certain number of iterations (25) we assume no solution exists.

Value Navigator discounts monthly, up until the last year that is specified for monthly output in the Project Settings. So, we use the mid-month calculation up to the last year for monthly output, then we use the mid-year calculation.

Net Present Value Discounted mid-year:NPV = FV/(1 + i) ^ n - 0.5

Net Present Value Discount mid-month:NPV = FV/(1+ i) ^ ((n-0.5)/12)"