What are the project decision based on NPV and IRR？

帮考网校2020-10-13 16:48:41

The project decision based on NPV (Net Present Value) and IRR (Internal Rate of Return) is a financial analysis method used to evaluate the profitability of a project.

NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. It calculates the value of an investment in today's dollars and helps determine the profitability of a project. A positive NPV indicates that the project will generate profits, while a negative NPV indicates that the project will result in losses.

IRR is the rate at which the project's net present value is equal to zero. It represents the rate of return that the project is expected to generate over its lifetime. A higher IRR indicates a more profitable project.

In project decision-making, both NPV and IRR are used to evaluate the potential profitability of a project. If the NPV is positive and the IRR is higher than the required rate of return, the project is considered financially viable and is likely to generate profits. Conversely, if the NPV is negative or the IRR is lower than the required rate of return, the project is considered unprofitable and should be rejected.

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What are the project decision based on NPV and IRR？

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