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research article
On the (Non-)Equivalence of IRR and NPV
The internal rate of return (IRR) is generally considered inferior to the net present value (NPV) as a tool for evaluating and ranking projects, despite its inherently useful comparability to the cost of capital and the return of other investment opportunities. We introduce the "selective IRR", a return criterion which, as a selection of an extended set of possible IRRs, is NPV-consistent. The selective IRR always exists, is unique, easy to compute, and does not suffer from drawbacks that befall the project investment rate, the only other known NPV-consistent return criterion. (C) 2014 Elsevier B.V. All rights reserved.
Use this identifier to reference this record
Type
research article
Web of Science ID
WOS:000337070500004
Authors
Publication date
2014
Published in
Volume
52
Start page
25
End page
39
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
August 29, 2014