fbpx
Do you need customer support or technical assistance? Click here to submit a support ticket...

TOPIC: NPV IRR and Payback period

NPV IRR and Payback period 11 years 8 months ago #1869

  • Muhammad Zahid
  • Muhammad Zahid's Avatar Topic Author
  • Visitor
  • Visitor
i read that during project selection v have to consider larger NPV and IRR while small or little Payback period.so what v have to select in following scenarios.
Project A has NPV and Payback period both are larger then Project B.
so ?

Re:NPV IRR and Payback period 11 years 8 months ago #1870

  • Cornelius Fichtner
  • Cornelius Fichtner's Avatar
  • Offline
  • Administrator
  • Administrator
  • President, OSP International LLC
  • Posts: 1941
  • Karma: 113
  • Thank you received: 534
Muhamad,

Larger NPV = Good
Larger IRR = Good
Larger Payback Period = Bad

So in your example, where project A has a larger NPV and also a larger Payback Period it is impossible to really make a selection:

NPV = Project A has a larger NPV and is therefore better
Payback Period = Project B has a smaller Payback Period and is therefore better

It's impossible to make a final decision just based on these numbers.
Until Next Time,
Cornelius Fichtner, PMP, CSM
President, OSP International LLC
Moderators: Yolanda MabutasMary Kathrine PaduaJohn Paul BugarinLisa Sweeney PMPHarry ElstonBrad Pennington, PMPKyle Kilbride, PMPJean KwandaThomas Pinckney

OSP INTERNATIONAL LLC
OSP INTERNATIONAL LLC
Training for Project Management Professional (PMP)®, PMI Agile Certified Practitioner (PMI-ACP)®, and Certified Associate in Project Management (CAPM)®

Login