what is the difference between npv and irr method of capital
budgeting and which one is better?

Answers were Sorted based on User's Feedback

what is the difference between npv and irr method of capital budgeting and which one is better?..

NPV stands for net present value where as I.R.R stands for
internal rate of return.N.P.V is the difference between
present value of cash inflow and present value of cash outflow
or initial investment.I.R.R is the rate that equates present
value of cash inflow with cash outflow.N.P.V is better
because it takes into consideration the time value of money.

 Is This Answer Correct ? 56 Yes 24 No

what is the difference between npv and irr method of capital budgeting and which one is better?..

IRR measures the 'max return potential' implied in a
project without considering funding costs (hence the
term 'Internal'). While it is a useful guideline, it fails
in comparison to NPV as the latter incorporates funding
costs as well. NPV will be turn positive only when the IRR
> WACC! Secondly, IRR (the same as CAGR) assumes that the
reinvestment rate of returns is the same as the IRR itself
(that is, it involves circularity. The very reason why we
doing manual calculations).
In general, the order of preference should be NPV >> MIRR
>> IRR
http://finaticsonline.com/blog/2010/11/npv_vs_irr_vs_mirr/

 Is This Answer Correct ? 17 Yes 2 No

what is the difference between npv and irr method of capital budgeting and which one is better?..

NPV and iRR are the capital budgetin technique which are
used to determine wheather a firms long term investment
decision is correct or not.
using net present value mathod we can calculate the
presrent value of all the future cash generated due to the
investment, adding those casf flow andthen subtracting the
aggregated amount from the initial investment we can
calculate the npv of that project if the npv is positive
then project is good for investment, vicaversa
internal rate of return is calculated when NPV is zero, it
is a rate which determine the growth rate due to the
investment

 Is This Answer Correct ? 4 Yes 15 No

what is the difference between npv and irr method of capital budgeting and which one is better?..

Above answer is correct but NPV meaning sum of total
present values of future cash inflows and total present
cash outflows

 Is This Answer Correct ? 8 Yes 20 No

what is the difference between npv and irr method of capital budgeting and which one is better?..

NPV MEANS NET PRESENT VALUE AND IRR MEANS INTERNAL RATE OF
RETURN BUT NPV IS BETTER THAN IRR.BECAUSE NPV IS SUM OF
CASH INFLOW AND CASH OUT FLOW.

 Is This Answer Correct ? 5 Yes 19 No

More Banking Finance Interview Questions

What do you know about the historical background of Development Financial Institutions (DFIs)?

What is Inflation Risk?

what are the interview question for housing finance companies in credit department.

Please let know any good short term courses courses in Finance related to Stock markets as I would like to enhance my career in the invest banking sector.

What is Fiscal Policy?

Respected Sir, I want to know that what is Deriatives? How it works?

what ism put option

what is the difference b/w acquisation by subsidy & acquisation by a company?

what is letter of credit

when ur having total sales experience in a spoke location and if you wanted to relocate in cities then how can u do business in the new city market.

hiiiii Respected sir/madam gd morning sir/Madam Can you please give me following questions of answer.? 1) what is the main difference between Current Assests and Fixed Assests? 2) working capital Management? why? which steps requried for working capital management at the statring day of the any type of business? 3) Ratio analysis? why? (Note: 1,on the above questions of answer the following points are exculded) 1) object 2) theory 3) features (Note :2,on the aove questions of answer the follwing points are inculded) 1) Practical oriented 2) aspects of business please reply..................

how do you tackle a difficult customer

Categories