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 suer from drawbacks that befall the project investment rate, the only other known NPV-consistent return criterion.


Year:
2013
Publisher:
Lausanne, EPFL CDM MTEI
Keywords:
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 Record created 2013-10-03, last modified 2018-09-13

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