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是分析是否值得投资，而NPV是计算具体回报，两者相互相成，一点都不冲突 -大家帮我买房- ♂ (0 bytes) () 03/23/2012 postreply 08:01:26