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2006•Zhongyang Caizheng Jinrong Xueyuan xuebaoRequires access

The Choice between NPV and IRR in Investment Decisions

Zhang Xiao-l

Open publisher page 1 citations

Abstract

NPV and IRR are the two most commonly used measures of project worth in investment decisions.Recent studies,however, show that the later has three major limitations in terms of meeting the objective of benefit maximization,economic reasonableness of its underlying assumptions and universal applicability.It is,therefore,not a reliable measure and can not be used as the basis for project selection.

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What this paper is about

NPV and IRR are the two most commonly used measures of project worth in investment decisions.Recent studies,however, show that the later has three major limitations in terms of meeting the objective of benefit maximization,economic reasonableness of its underlying assumptions and universal applicability.It is,therefore,not a reliable measure and can not be used as the basis for project selection.

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Available abstract

NPV and IRR are the two most commonly used measures of project worth in investment decisions.Recent studies,however, show that the later has three major limitations in terms of meeting the objective of benefit maximization,economic reasonableness of its underlying assumptions and universal applicability.It is,therefore,not a reliable measure and can not be used as the basis for project selection.

Key concepts: Maximization, Investment (military), Selection (genetic algorithm), Economics, Measure (data warehouse), Actuarial science, Net present value, Investment decisions

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