The minimum attractive rate of return (MARR) has been used for many tears as a decision criterion in engineering economic analysis. Typically, inflation has been either ignored in such studies or considered by adjusting each of the individual cash flo...
The minimum attractive rate of return (MARR) has been used for many tears as a decision criterion in engineering economic analysis. Typically, inflation has been either ignored in such studies or considered by adjusting each of the individual cash flows associated with a project for inflation, frequently a lengthy process.
This research investigates a new decision criterion for economic analysis, the comparative rate of return (CRR). The CRR is defined to be the minimum rate of return earned on uninflated cash flows which will result in the MARR being earned on actual deflated cash flows. Given the CRR, analysis of proposed expenditures is simplified, since the analysis can be performed on the uninflated cash flows.
The research presents a derivation of the CRR and investigates its relationships to the MARR, inflation rate, project cash flows and project life.