In this video on NPV vs IRR, we discuss the top differences between the two along with examples and also which tool has more relevance.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐍𝐏𝐕?
-----------------------------
NPV = CF/(1=r)^t - Cash Outflow
NPV is the acronym for Net Present Value, calculated as the present value of cash inflow less present value of cash outflow.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐈𝐑𝐑?
-----------------------------
IRR = CF/(1+IRR)^t = Cash Outflow
IRR is the acronym for Interest Rate of Return, known as discount rate that make NPV of all cash inflows of a project equal to zero.
𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐍𝐏𝐕 𝐯𝐬 𝐈𝐑𝐑
----------------------------------------------------------
NPV is expressed in the form of currency return which a company expects from the project. Whereas, IRR is expressed in the form of percentage return a firm expects from the project
if you are evaluating two or more mutually exclusive projects so better go for NPV method instead of IRR method. It is safe to depend on NPV method for selecting the best investment plan due to its realistic assumptions & better measure of profitability.
Even you can make use of IRR method it is a great complement to NPV and will provide you accurate analysis for investment decisions.
For more information, you can go to: [ Ссылка ]
Subscribe to our channel to get new updated videos.Click the button above to subscribe or click on link below to subscribe - [ Ссылка ]
