Which of the following statements is correct?
A) NPV and IRR both measure in absolute amounts of money.
B) NPV measures in absolute amounts of money. IRR is a percentage measure.
C) IRR measures in absolute amounts of money. NPV is a percentage measure.
D) NPV and IRR are both percentage measures.

Question

Quizplus · Accepted Answer

NPV measures the sum of the present values of future cash flows, discounted at the required rate of return, minus the initial investment. This results in an absolute amount of money. IRR, on the other hand, is a percentage measure of the expected rate of return of an investment that makes the net present value of all cash flows from the investment equal to zero. Therefore, option B is the correct statement.

Which of the Following Statements Is Correct