BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Net present value = uses all the discounted cash flows of a project = the PV of all benefits (cash inflows) minus the PV of all costs (cash outflows) of the project. Internal rate of return = the most popular alternative to the NPV.

Detailed explanation-2: -IRR and NPV have two different uses within capital budgeting. IRR is useful when comparing multiple projects against each other or in situations where it is difficult to determine a discount rate. NPV is better in situations where there are varying directions of cash flow over time or multiple discount rates.

Detailed explanation-3: -Which Is Better: NPV or IRR? It depends. IRR is usually more useful when you are comparing across multiple projects or investments, or in situations where it is difficult to determine the appropriate discount rate.

Detailed explanation-4: -Though the NPV formula estimates how much value a project will produce, it doesn’t tell you whether it is an efficient use of your investment dollars. The payback period, or payback method, is a simpler alternative to NPV. The payback method calculates how long it will take to recoup an investment.