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NPV V/s ROI v/d IRR

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soniaacp_123
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NPV V/s ROI v/d IRR

Postby soniaacp_123 Fri Aug 19, 2016 4:51 am

Please tell the difference between NPV , ROI and IRR and in which scenario what should be selected as per questions in PMI - ACP
seema.sonkiya
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Re: NPV V/s ROI v/d IRR

Postby seema.sonkiya Mon Aug 22, 2016 9:28 am

NPV:
For the NPV, all the inflows and outflows are calculated in present value term. Inflows come in a positive value, and outflows are a negative value. Then NPV is calculated which is the sum of present value of future cash flows and inflows.

IRR:
IRR is the interest rate at which the net present value of all inflows and outflows equals zero. IRR is used to evaluate the effectiveness of a project; greater it is better it is.

Return on Investment:
Return on Investment = (gain from investment – cost of investment) / cost of investment
Higher the ROI, better it is.

For the exam, you are not required to go in the calculation. Just an understanding of these metrics is more than enough.
soniaacp_123
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Re: NPV V/s ROI v/d IRR

Postby soniaacp_123 Mon Aug 22, 2016 11:59 am

Thank you Seema

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