FINANCE

Capital Rationing

Internal Rate of Return (IRR), Net Present Value (NPV) & Payback Period

Internal rate of return (IRR) only informs the decision maker regarding the working procedure of real yield in the long term capital investment but IRR have various mistakes due to which its expressiveness is narrowed (Lohmann & Baksh, 1993). However, the net present value (NPV) indicates the total growth of wealth in amount that have been accumulated by making the investment during a certain period but it does not tell about the capital investment's profitability. The payback period is reasonably effective for achieving increasing rates of capital and also ...