There are circumstances where the NPV rule and IRR rule

There are circumstances where the NPV rule and IRR rule provide conflicting advice,  NPV rule is more preferred over IRR.

 

The reason is that NPV more likely uses the “realistic” rate, to discount the cash flows, rather than an “arbitrary” rate, the IRR, that makes NPV =0.  When the IRR is very high relative to the actual cost of capital,  it is unrealistic to assume reinvestment of the cash flows at that high rate. 

 

所有跟帖： 

• IRR model is totally wrong. Considering if you have multi IRRs. -sweetptt- ♂ (0 bytes) () 03/22/2012 postreply 22:19:47

• yes, IRR model is more limited. -kukuren2000- ♀ (0 bytes) () 03/22/2012 postreply 22:28:25

• IRR是分析是否值得投資，而NPV是計算具體回報，兩者相互相成，一點都不衝突 -大家幫我買房- ♂ (0 bytes) () 03/23/2012 postreply 08:01:26