Answer to Question #57521 in Finance for morium begum

Question #57521
Does the assumption concerning the reinvestment of intermediate cash inflow tend to favor NPV or IRR? In practice, which technique is preferred and why?
1
Expert's answer
2016-02-11T00:00:47-0500
The net present value (NPV) is the sum of the discounted cash flows minus the original investment.
The internal rate of return (IRR) on a project is the rate of return at which the projects NPV equals zero.
Both methods are used in calculation, but both of them are used for different purposes, because NPV shows the net value of investment for a given discount rate and IRR shows the discount rate, for which NPV = 0.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS