In early 2013, kieran gregory, of drug revolution,
Other methods used to evaluate investment projects include payback period and internal rate of return (IRR). Payback Period is a method of calculating how long it will take for an investment project to “pay back” the initial capital outlay, while IRR determines the profitability of a project by comparing the present values of cash inflows and outflows over the life of an investment. While both methods are useful, they are inferior to NPV as they do not account for all costs associated with a project or consider future cash flows beyond those occurring in the first few years. Additionally, both methods fail to account for opportunity cost; that is, what could have been achieved if resources were allocated elsewhere instead. NPV on the other hand incorporates these factors into its analysis which makes it more comprehensive and accurate than other methods when evaluating investments projects.
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