The net present value model differs from the IRR model in that it does NOT show the project's unique rate of return.

Question

Quizplus · Accepted Answer

The statement is correct. The net present value (NPV) model calculates the present value of all cash flows associated with a project and compares it to the initial investment. It does not provide information on the project's internal rate of return (IRR). In contrast, the IRR model calculates the discount rate that makes the project's net present value equal to zero, providing a measure of the project's unique rate of return.

The Net Present Value Model Differs from the IRR Model