| Abstract: | An inflation-adjusted IRR model for the appraisal of levered projects is developed within the supply side studies framework by using the tax approach. An empirical test of the model on industrial projects has indicated that the general pattern of the project rankings was not significantly affected in the presence of inflation. However, the shifts in the ranks of the individual projects and over-and-under biases in the traditional accept decisions are observed. Further, all the projects have shown a magnified impact of financial leverage on the IRRs. |
