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Tutorial 8: AnswersQuestions1. Define and explainthe Payback Period Method, the Net Present Value (NPV) Method and the Internal Rate of Return (IRR) Method. In your discussion state the criteria for accepting or rejectingan investment under each rule. Discuss the strengths and weaknessesassociated with the use of each alternative method. ,
Internal Rate of Return Internal rate of return (IRR) on an investment is the discount rate that would cause theinvestment to have a net present value of zero. It can be found by solving the NPV equation given below for the value of kthat equates the present value of cash inflows with the initial investment.