Session 8: NPV and Other Investment Rules

Question 1

When to accept project using IRR?

Answer 1

When IRR > discount rate

Question 2

When to accept project using NPV?

Answer 2

When NPV>0

Question 3

Difference between IRR and YTM

Answer 3

• IRR evaluates the financial outcomes of projects or investments the organizations are considering
• YTM to estimate the value of different bond investments

Question 4

What’s the difference between NPV and IRR?

Answer 4

NPV ~= PV

IRR ~=Internal rate of return…the (1+r)^t part is (1+IRR)^t

Question 5

What are relevant cash flows for making capital investment decisions?

Answer 5

all changes that make a direct impact on cashflows