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WHAT IS IRR,NPV AND AT WHICH RATE THE PRESENT VALUE IS
CALCULATED
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Answer Posted / h.r. sreepada bhagi
Both IRR & NPV are Capital Budgeting techniques using the
concept of present value of money.
NPV (Net Present Value)is the method of arriving at net
cash-flow by applying a discount rate (Interest rate) over
the period of cash flows from the project(business) in which
money is invested. If the NPV is positive and good, teh
project is worth considerable for take off.
IRR (Internal Rate of Return) is the rate of return at which
the Present value of future cash-flows and present cash
outflow (investment) is Zero. If the IRR is above the cost
of capital, the project is considered to be worth going
ahead. IRR is also called DCF (Discounted Cash Flow method).
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