NPV vs. IRR

Discount rate 0%, NPV =$670,000

Discount rate 2%, NPV=$614,400

Discount rate 6%, NPV=$514,820

Discount rate 11% NPV= $409,000

Capital Cost 5%, Modified IRR= 45.6%

Upon plotting these points on a chart an obvious relationship is modeled. The lower the discount rate the higher the NPV appears to manifest. The curve crosses the x axis at a discount rate of .03%.

Rate at 1%, NPV=$65,358

Rate at 4%, NPV= $7,593

Rate at 10%, NPV= -$91,776

Rate at 18%, NPV= -$197,871

Discount rate at X axis = 2.8%

NPV=3,864,000

Anthes (2003) presented some very useful descriptions of the terms net present value (NPV) and internal rate of return (IRR). The article suggested that the NPV and the internal rate of return IRR is defined as two faces of the same coin and both reflect on the anticipated performance of a firm or business over a particular period of time....
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