## ABSTRACT

The net present value approach does not result in a rate of return on capital ratio at all. A positive net present value implies that the capital resources of the company will be raised by the sum indicated immediately it undertakes the investment project, assuming that the net cash flows and the interest rate have been computed with accuracy. It would be feasible for the Monopolies Commission to undertake such an assessment, basing its conclusions on expected dominant firm prices, the lifetime of the project, and the relevant interest rate by which the future net cash flows might be discounted. The Commission might then wish to establish a maximum net present value/initial capital outlay ratio by which to judge the economic performance of a dominant firm. Such a task would be monumental; it would involve the Commission in making forecasts of future prices, demand conditions, interest rates and the like. An outside body could never expect to obtain the confidence of industry in such forecasts. The net present value approach to evaluation of market performance could not be used effectively in the supervision of dominant firm activity.