Which of the following differentiates the net present value (NPV) from the internal rate of return (IRR)?
- The NPV considers the time value of money, whereas the IRR does not consider the time value of money.
- The NPV is a discounting model, whereas the IRR is a nondiscounting model.
- The NPV measures profitability in absolute terms, whereas the IRR measures profitability in relative terms.
- The NPV assumes that each cash inflow received is reinvested at a discount, whereas for the IRR, it is reinvested at the required rate of return.

Question

04-08-2024
Business

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Which of the following differentiates the net present value (NPV) from the internal rate of return (IRR)?
- The NPV considers the time value of money, whereas the IRR does not consider the time value of money.
- The NPV is a discounting model, whereas the IRR is a nondiscounting model.
- The NPV measures profitability in absolute terms, whereas the IRR measures profitability in relative terms.
- The NPV assumes that each cash inflow received is reinvested at a discount, whereas for the IRR, it is reinvested at the required rate of return.

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