HBR 20-Minute Manager Boxed Set (10 Books) (HBR 20-Minute Manager Series)

Finance Basics

70

TABLE 

Amalgamated extruder savings

Year Savings Cumulative savings

1 $ 18,000 $ 18,000

2 18,000 36,000

3 18,000 54,000

4 18,000 72,000

5 18,000 90,000

6 18,000 108,000

7 18,000 126,000

Net present value and

internal rate of return

Net present value (NPV) and internal rate of re-

turn (IRR) are highly valuable analytical tools, but

they can be fairly complex. Because most calculators

and spreadsheet programs can do the calculations for

you, we’ll describe these tools in broad terms only.

Consider the principle that underlies both meth-

ods: the time value of money. This principle states

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