Discounted cash flow rate of return DCFROR

Discounted Cash Flow In the discounted cash flow method, all the yearly after-tax cash flows are discounted or compounded to time zero depending upon the choice of time zero. The following equation is used to solve for the interest rate i, which is the discounted cash flow rate of return (DCFROR). 

Discounted Cash Flow Rate of Return (DCFROR)... 

This particular rate is called the discounted cash flow rate of return (DCFROR) and is a measure of the maximum interest rate that the project could pay and still break even by the end of the project life ... 

The interest rate criterion is known as discounted cash flow rate of return (DCFROR) or internal rate of return (IRR), which is defined as the discount rate calculated by setting NPV = 0 in Eq. [6.1] at the end of the period of the project. An IRR higher than the internal hurdle rate means that a project is worth investing from the perspective of a given company. 

The ideas discussed in Chapter 9 are extended to evaluate the profitability of chemical processes. Profitability criteria using nondiscounted and discounted bases are presented and include net present value (NPV), discounted cash flow rate of return (DCFROR), and payback period (PBP). A discussion of evaluating equipment alternatives using equivalent annual operating costs (EAOC) and other methods is presented. Finally, the concept of evaluating risk is covered and an introduction to the Monte Carlo method is presented. 

Interest Rate Criterion. The discounted cash flow rate of return (DCFROR) is defined to be the interest rate at which all the cash flows must be discounted in order for the net present value of the project to be equal to zero. Thus, we can write... 

For the problem presented in Exanples 10.1 and 10.2. determine the discounted cash flow rate of return DCFROR). 

Discounted cash flow rate of return (DCFROR), 306-311... 

Figure 6.3 Evaluation of economic sustainability. OSBL, Outside the battery limits WC, working NPV, net present value FCI, fixed capital investment DPBP, discounted payback period DCFROR, discounted cash flow rate of return.

It is worth noting that for evaluation of the discounted cash flow rate of return, no interest rate is required because this is what we calculate. Clearly, if the DCFROR is greater than the internal discount rate, then... 

An evaluation of the after-tax NPy and the discounted cash flow rate of return on investment (DCFROR) for your recommended (optimized) process. 

Figure 10.3 provides the cumulative discounted cash flow diagram for Example 10.3 for several discount factors. It shows the effect of changing discount factors on the profitability and shape of the curves. It includes a curve for the DCFROR found in Example 10.3. For this case, it can be seen that the NPV for the project is zero, hi Exanple 10.3. if the acceptable rate of return for our conpany were set at 20%, then the project would not be considered an acceptable investment. This is indicated by a negative NPV for I = 20%. 

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