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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Aggregate Capital Tied-up by Investment Projects―The Possibility of a Simple Estimation
Author(s)
Mária Illés
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DOI:10.17265/2328-2185/2019.02.001
Affiliation(s)
University of Miskolc, Miskolc, Hungary
ABSTRACT
The
aggregate capital needs are a new business economics category which provides a
new aspect to evaluate investment projects. The
literature does not deal with this category as the project’s total financial
resource requirement. It is the total capital tied-up for the project in its
lifetime. For calculation of it, the yearly capital tie-ups are being added
together. Based on this, it can be examined the total capital amount, which
results in a given net present value, or the
total capital amount, which operates according to the given rate of
profitability. The paper interprets the category, presents its
relationship with the interest rate, and also presents the method of
calculation based on model editing. In the case of the internal rate of return,
the estimation may be greatly simplified. Instead of determining the yearly
amounts and summation of these, the estimation can be carried out also with a
simple division of two data. The paper demonstrates the possibility of
simplification and shows an example to present the interrelations of data.
KEYWORDS
net present value (NPV), internal rate of return (IRR), capital tied-up, return requirement, yield structure
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