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When the objective is to maximize total value, the calculated IRR should not be used to choose between mutually exclusive projects. NPV vs discount rate comparison for two mutually exclusive projects. Project 'A' has a higher NPV (for certain discount rates), even though its IRR (= x-axis intercept) is lower than for project 'B' (click to enlarge)
An NPV calculated using variable discount rates (if they are known for the duration of the investment) may better reflect the situation than one calculated from a constant discount rate for the entire investment duration. Refer to the tutorial article written by Samuel Baker [9] for more detailed relationship between the NPV and the discount rate.
The PPV and NPV describe the performance of a diagnostic test or other statistical measure. A high result can be interpreted as indicating the accuracy of such a statistic. The PPV and NPV are not intrinsic to the test (as true positive rate and true negative rate are); they depend also on the prevalence. [2]
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The discount rate used to calculate the net present value (NPV) of the DCF to equal zero is the equivalent yield, or the IRR. [ 14 ] The calculation not only takes into account all costs, but other assumptions including rent reviews and void periods.
Under each of the above headings: financial managers have to use the following financial figures as part of the evaluation process to determine if a proposal should be accepted. Payback period with NPV (Net Present Value), IRR (internal rate of return) and DCF (Discounted Cash Flow).
The return, or the holding period return, can be calculated over a single period.The single period may last any length of time. The overall period may, however, instead be divided into contiguous subperiods. This means that there is more than one time period, each sub-period beginning at the point in time where the previous one ended. In such a case, where there are
Like the internal rate of return, the modified internal rate of return is not valid for ranking projects of different sizes, because a larger project with a smaller modified internal rate of return may have a higher net present value. However, there exist variants of the modified internal rate of return which can be used for such comparisons ...