A Method of Evaluating Profitability and Risk of Multiple Investments Applying Internal Rate of Return

Mizumachi, Tadahiro

doi:10.7232/iems.2010.9.2.121

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“…This is used to evaluate potential corporate profits [6,7]. This is a discount rate that turns pure cash flow to zero [8,9]. In the net present value method, the present value is calculated by discounting the future cash flows of the project at a predetermined interest rate (i.e., the interest rate to maturity) [10,11].…”

Section: Literature Reviewmentioning

confidence: 99%

NPV and IRR’s Comparative Analysis in Enterprises Investment Decision Making

Liu¹

2022

Advances in Economics, Business and Management Research

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In the economic evaluation of engineering projects, the net present value and internal rate of return (IRR) are generally used to measure the economic benefits of the project. However, the analysis of the two indices is sometimes self-contradictory. This article points out that the net present value method is more scientific and reasonable than the internal rate of return through specific case analysis of the causes of this problem. Especially in the feasibility analysis of mutually exclusive scheme under certain circumstances, when the net present value index and the internal rate of return index conclusion contradict, it is better to choose the net present value method as the preferred decision method.

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