Optimizing a project’s true rate of return

This paper relates to the search for a project-representative rate of return, to replace the popular, but flawed and dysfunctional internal rate of return criterion. Subsequently, the notion of the true rate of return (TRR) is introduced in the environment of a constant market interest rate (Hajdasinski 1995), and the TRR-optimization procedure is presented as a flow chart. The environment of a variable market interest rate is then considered, and the corresponding mathematical TRR-optimization model for a sample investment project is defined. The optimal TRR is found using genetic algorithms, and the profitability-benchmark market interest rate is determined, applying the concept developed earlier by Hajdasinski (1993).