relationship between the present value of project inflows and outflows. PI is
calculated as follows:
Using data from the previous example,
4.12.5Internal Rate of Return
The most popular sophisticated analysis technique is the internal rate of return
(IRR). IRR is closely related to NPV. IRR is the actual rate of return that an invest-
ment in a project will bring if cash inflows and outflows are as projected. Orga-
nizations set a minimum rate of return that investment in the project must
achieve to be considered acceptable. If the IRR is greater or equal to the
minimum return rate, the proposal may be accepted. Otherwise, the investment
proposal should ...
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