What is the difference between Net Present Value(NPV) and Internal Rate of Return(IRR)?
I don't have any idea. How are those important?
I am a student of finance and now continue financial management course. These are the terms from that course.
Great question. There are actually three terms to consider:NPV is a financial figure of the time series of income streams. It is a value or figure usually in monetary terms.IRR is the rate that is needed to fully fund a project. It is stated as a rate or percentage.MIRR is a more complex calculation of the IRR and it recognizes the weight average cost of capital may be different and recognizes both positive and negative cash flows. Like IRR, MIRR is also a rate.All three have a time and place depending upon the comparisons needed.The opportunity cost of money, the varying costs of projects of different scales all play an integral role in what analysis is appropriate.In Microsoft Office in the module for spreadsheets called Excel, there is a function for each of these financial analysis terms.
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