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TOPIC: NPV IRR and Payback period

NPV IRR and Payback period 6 years 3 weeks ago #1869

  • Muhammad Zahid
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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 ?
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Re:NPV IRR and Payback period 6 years 3 weeks ago #1870

  • Cornelius Fichtner
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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
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