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A resolution to the NPV-IRR debate?
journal contribution
posted on 2023-06-08, 06:39 authored by Mike OsborneTwo criteria for choosing between capital investment projects are net present value (NPV) and internal rate of return (IRR). Sometimes they provide inconsistent rankings. This inconsistency sparked a debate about which criterion is better. The debate has lasted more than 100 years. This paper describes a new approach to the debate. The time value of money equation is a polynomial, and a polynomial of order n does not have a single root. It has n roots. The result of taking into account the n solutions for IRR is a new equation for NPV that suggests a resolution to the debate.
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Publication status
- Published
Journal
Quarterly Review of Economics and FinanceISSN
10629769Publisher
ElsevierExternal DOI
Issue
2Volume
50Page range
234-239Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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