Order Now
Menu
  Back to all posts Other Essays

NPV and IRR

by Expert Jayjay1 | 09 Jun 2017

In theory, the value of a company is related to its future cash flows. If the cash flows are negative, then the company should be paying the investor to take the company away. Net present value and internal rate of return are two of the most common standard methodology measures in the course of production and inventory. NPV is widely known in reflecting the time value of money, thus, business analysts imply that NPV is rather more efficient are particularly important when dealing with high interest rates although not so much in production and inventory as IRR has the capacity to predict and anticipate the cash flow of the company’s finances accurately (Lee, 1997).

Need essay sample on

"NPV and IRR" topic?

We will write a custom essay sample specifically for you

Proceed

Methodologies like long-run average cost and total cost without discounting following the EOQ model are found to deter research that even the use of an Occam’s razor concept would be unlikely. Deterministic demands would help analyze a good approximation in production costs thus helping financial analysts foresee areas that require adept decision making skills (Ittelson, 2009)—the inclusion of average costs and objective functions.

Students Very Often Tell EssayLab support:
Who wants to write assignment for me?
Professional writers recommend:
Things Go Better
Paper Writing Service Write A Paper Online Custom Essay Writing Service Best Essay Writing Service

Financial managers use IRR and NPV to serve as a goal in their investments. Cost of capital is a very important concept within financial management, because it is the rate of return that must be achieved in order for the price of the stock to remain unchanged. Therefore, the cost of capital is the minimum acceptable rate of return for the company's declining NPV or in cases where costs come before profit. Financiers must know the cost of capital (the minimum required rate of return) in making capital budgeting decisions, helping to establish the optimal capital structure, and in making decisions such as leasing, bond refunding, and working capital management. The cost of capital has been used either as a discount rate under the NPV method or as a hurdle (cutoff) rate under the IRR method. Results achieved with IRR may be wrong investments as compared to NPV curves in evaluating investments (Harris & Raviv, 1991).

References

  • Harris, M., & Raviv, A. (1991). The Theory of Capital Structure. The Journal of Finance, 46(1).
  • Ittelson, T. R. (2009). Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports (Revised ed.). New Jersey, USA: Career Press.
  • Lee, M. H. (1997). Valuing Finite-Maturity Investment-Timing Options. Financial Management, 26(2).
Learn more:
Synposis of Plutarch’s Life Bordering on the Insane Will the World Run Out of Water?

Do You need a paper on this topic?

Order Your Essay
Writer avatar

American Tutor

№7 In global rating

37

finished papers

30

customer reviews

98%

success rate

Writer avatar

SuccinctResearch

№12 In global rating

159

finished papers

109

customer reviews

99%

success rate

Writer avatar

Prof Raph

№19 In global rating

167

finished papers

133

customer reviews

100%

success rate

Writer avatar

Prof. Georgewhite

№2 In global rating

80

finished papers

66

customer reviews

97%

success rate

Writer avatar

Dr.Intelligent.

№10 In global rating

103

finished papers

77

customer reviews

100%

success rate

Writer avatar

MD. Nilerma

№11 In global rating

153

finished papers

84

customer reviews

100%

success rate

Writer avatar

Professor Perez

№16 In global rating

239

finished papers

171

customer reviews

100%

success rate

Writer avatar

Profmox

№1 In global rating

67

finished papers

42

customer reviews

100%

success rate

Writer avatar

Dr. Florence

№20 In global rating

37

finished papers

26

customer reviews

96%

success rate

Writer avatar

Prof. Akademia

№15 In global rating

519

finished papers

385

customer reviews

98%

success rate

Order your paper now!

I need
My email
By clicking “Continue”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related emails.

EssayLab Reviews

  • Jason (student)

    I asked Essay Lab to write an essay for me and received paper the next day after I ordered it! Thank you!

  • Kimberly (student)

    Awesome WORK! If I ever need to write my essay – I will use only EssayLab!

  • Matt (student)

    These people are lifesavers! Just ask – “write me an essay” and they will start right away!

Support contacts

[email protected]