Read the article below. Then write a one-to-two page paper answering the following question:
Which method do you think is the better one for making capital budgeting decisions - IRR or NPV?
Defend your answer with references to the background materials.
Please read the following article which is available in Proquest:
Internal rate of return
Computerworld. Framingham, Feb 17, 2003, Gary H Anthes.
Abstract:
Internal rate of return (IRR) is the flip side of net present value (NPV) and is based on the same principles and the same math. NPV shows the value of a stream of future cash flows discounted back to the present by some percentage that represents the minimum desired rate of return, often a company's cost of capital. IRR, on the other hand, computes a break-even rate of return. It shows the discount rate below which an investment results in a positive NPV and above which an investment results in a negative NPV. It is the breakeven discount rate, the rate at which the value of cash outflows equals the value of cash inflows.