Post by account_disabled on Mar 9, 2024 23:28:45 GMT -7
These are the net cash flows earned over the life of the investment each period, bring them to the current moment and compare them to the initial investment. The initial question is what interest rate will we use to discount these flows. The answer is that this ratio must be chosen by the analyst based on his or her own criteria. It can be the average profitability of the projects already in the portfolio or it can be the cost of capital used in financing.
The choice of interest rates is an important issue because we will select those projects that exhibit the highest values and discard those projects that exhibit negative or zero values. Therefore an inverse relationship BTC Users Number Data is established between the value and the minimum required profitability so when we increase the required profitability the projects with the lowest profitability will be eliminated. The main advantage is that it shows the profitability of the project after taking into account all discounts although it is absolute profitability and net profit.
The main disadvantages are that on the one hand it leaves the discount rate to the investor's use and sometimes its determination is not easy and on the other hand it is more useful to compare relative returns than absolute returns. Investment Project Analysis Internal Rate of Return in Investment Project Analysis Another method commonly used in investment selection is the internal rate of return also known as it can be defined as the rate of return equal to the positive and negative cash flows generated by the investment project. In other words, it is the profitability rate when the net present value is zero. Therefore it is the profitability provided by the investment project which corresponds to the expected value of the investment rate regardless of the investor wishes.
The choice of interest rates is an important issue because we will select those projects that exhibit the highest values and discard those projects that exhibit negative or zero values. Therefore an inverse relationship BTC Users Number Data is established between the value and the minimum required profitability so when we increase the required profitability the projects with the lowest profitability will be eliminated. The main advantage is that it shows the profitability of the project after taking into account all discounts although it is absolute profitability and net profit.
The main disadvantages are that on the one hand it leaves the discount rate to the investor's use and sometimes its determination is not easy and on the other hand it is more useful to compare relative returns than absolute returns. Investment Project Analysis Internal Rate of Return in Investment Project Analysis Another method commonly used in investment selection is the internal rate of return also known as it can be defined as the rate of return equal to the positive and negative cash flows generated by the investment project. In other words, it is the profitability rate when the net present value is zero. Therefore it is the profitability provided by the investment project which corresponds to the expected value of the investment rate regardless of the investor wishes.