Distinguish Between NPV and IRR

question 42

Essay

Distinguish between NPV and IRR. Give one pro and one con for each method.

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Definitions:

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in discounting to determine investment worth.

Long-Term Liabilities

Financial obligations of a company that are due after more than one year.

Intangible Assets

Non-physical assets held by a company, such as patents, trademarks, copyrights, and goodwill, that add value to the business.

Cash Equivalents

Investments that are of a short-term nature, easily convertible into a specific amount of cash, and possess an initial maturity period of no more than three months, characterized by their high liquidity.