A resolution to the NPV-IRR debate?

Osborne, Mike (2010) A resolution to the NPV-IRR debate? Quarterly Review of Economics and Finance, 50 (2). pp. 234-239. ISSN 10629769

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Abstract

Two 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.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Depositing User: Michael Osborne
Date Deposited: 06 Feb 2012 20:32
Last Modified: 06 Jun 2012 13:54
URI: http://sro.sussex.ac.uk/id/eprint/26457
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