As the needed rate of return rises, the net present value falls indicates that a project is expected to create value for its owners.
The effect that an investment will have on the company's worth is calculated using Net Present Value (NPV). It entails accounting for the discrepancy between the current cash flows. As a result, an investment is approved if the NPV is positive, zero, or negative.
The internal rate of return is the discount rate that brings a project's net present value (NPV) to zero (IRR). In other words, it is the projected annual compound rate of return on a project or investment.
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