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Re: [Help-glpk] IRR (Internal Rate of Return) using MathProg
From: |
Noli Sicad |
Subject: |
Re: [Help-glpk] IRR (Internal Rate of Return) using MathProg |
Date: |
Sat, 15 Sep 2012 12:05:51 +1000 |
Hi Robbie,
On 9/15/12, Robbie Morrison <address@hidden> wrote:
> I cannot help you with the MathProg code. But I do use
> discounted cash flow calculations. So here are some
> observations:
>
> IRR is not NPV. You need to get the right formula from
> wikipedia. It seems to me (but I could be badly
> mistaken) that NPV is an explicit equation and IRR is
> implicit. NPV takes the discount rate as parameter,
> hence no need for numerical methods like
> Newton-Raphson. You just need NPV then?
Yes, my model is maximising NPV (as you can in this screenshot below).
https://picasaweb.google.com/116847891529748214201/ForestValueFOLPIBasedFormulationForestValuationForestEstateModellingAndWoodflowModel#5787997991655844226
> Once you get your formula working, check it against the
> appropriate spreadsheet function. In my case, I used:
> PMT(rate, periods, investment value, future value).
> That way you will align with the industry conventions.
>
> You can sometimes break the formulas up into parts for
> ease of coding.
>
> You will need to decide how to deal with all the corner
> cases: can the interest rate be zero for instance, do
> you wish to check, what happens then, and so on ..
>
> One reference that I never used, but looked interesting:
>
> Ã˜degaard, Bernt Arne. 2007. Financial numerical
> recipes in C++ -- April 2007. Software
> documentation.
>
> http://finance.bi.no/~bernt/gcc_prog
> http://finance.bi.no/~bernt/gcc_prog/recipes/recipes.pdf
> http://finance.bi.no/~bernt/gcc_prog/recipes/finrecipes.tar.gz
These financial recipes are interesting.
It might be good to include some of these financial functions (NPV,
IRR, etc.) in the MathProg. It will facilitates easy generating of
reports.
> Finally, try googling with "GAMS". This must be a
> common enough task for GAMS users. This one looks
> related (but care with the download, the filename
> contains comma chars):
>
> Wu, Jinzhuo, Mark Sperow, and Jingxin Wang. 2010.
> Economic feasibility of a woody biomass-based
> ethanol plant in central Appalachia. Journal of
> Agricultural and Resource Economics v35 no3
> p522-544.
>
> http://purl.umn.edu/99118
>
> http://ageconsearch.umn.edu/bitstream/99118/2/JARE,Dec2010,%2311F,pp522-544.pdf
Thanks for posting the URL of this paper. I am also interest in
Bioenergy modelling especially includes estate modelling (i.e. forest
estate for biomass for energy and farm estate for producing biomass or
biofuels for certain crop).
I just browse the pdf and it seems that it has good methodology in
using IRR and NPV as can see in the graphs.
Thanks.
Noli