IRR and Net Present Value

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 Do you think the internal rate of return (IRR) would be most efficient when trying to identify the net present value of the cash flow? If so, why do you think the IRR is the most efficient?

Nov 30th, 2015

Thank you for the opportunity to help you with your question!

Yes, the IRR is the most efficient method of identifying the NPV of the cash flow. The IRR (Internal Rate of Return) refers to the discount rate that delegates the NPV to zero. It is a process that identifies the cash inflows and outflows. The important thing is that it relies on the functions of the inflows and outflows that characterize a process. Generally speaking, when the project IRR is higher, the more feasible it is when undertaken. As such, it is a good method of ranking several prospective projects that are being considered by a firm. Assuming that all factors are held constant among the projects, the one that registers the highest IRR is taken as the best and undertaken first.


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Nov 30th, 2015

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