A review of: “APPLIED ECONOMIC ANALYSIS FOR TECHNOLOGISTS,ENGINEERS, AND MANAGERS ” BY MICHAEL S. BOWMAN Prentice-Hall,Inc., Upper Saddle River,New Jersey, 1999, xii + 561 pp., ISBN: 0-13-375932-6, List: $76.75.

In their recent paper Tang and Tang (2003 Tang, S. L. and Tang, H. J. 2003. The variable financial indicator IRR and the constant economic indicator NPV.. The Engineering Economist, Vol. 48(No. 1): pp. 69–78. [Taylor &; Francis Online] , [Google Scholar], pp. 69–78) revive a longstanding controversy—net present value (NPV) versus internal rate of return (IRR)—by characterizing the NPV as an economic indicator and the IRR as a financial one. The paper implies that this distinction justifies ranking financial alternatives by ranking their IRRs. In the current article, it is argued that the direct IRR ranking does not necessarily provide the same evaluation environment—and therefore a fair comparison—for each alternative involved, and that the incremental ranking approach is needed to remedy this shortcoming. The article also points out that Tang and Tang's numerical examples of simple projects with one sign change in their cash flow patterns do not address the problem of multiple IRRs, which consequently renders Tang and Tang's ranking approach dysfunctional. It is demonstrated that the concept of a true rate of return, substituting for the non-performing IRR and applied in conjunction with the incremental approach, provides an adequate tool for ranking mutually exclusive projects or a project's technical or financial alternatives.