Question
I just need a response in regards to this finance statement. Paragraph length The Internal Rate of Return (IRR) and the Net Present Value (NPV)
I just need a response in regards to this finance statement. Paragraph length
The Internal Rate of Return (IRR) and the Net Present Value (NPV) are very similar. When trying to find the IRR, the main thing that we are looking for is the discount rate that makes the NPV of an investment zero. This rate needs to be the internal rate which means that it only uses the cash flows from investments. The internal rate of return must not exceed that required return. If it exceeds the return rate, it must not be used. On the other hand, computing the NPV, we should take the difference of an investments market value and its cost. This could also be thought of as how much value was created or added by another investment. NPV can be used when, for example, when starting a business. In this case, we could see if the value of the business exceeds the cost of starting the business.
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