Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 11

What should be the decision criterion when using the NPV method to evaluate capital investments? Does the IRR method use the same criterion?

Step 1 of 2

NPV is a substantial method used in capital budgeting to evaluate the project. With help of NPV, the company can decide whether to accept or reject the project. NPV is the change between the present value of all the future cash inflows and the present value of all the cash outflows over some time.