- Net Present Value (NPV)
- If a cash flow fluctuates, the best valuation approach is the net present value.
- Internal Rate of Return (IRR)
- Limitation: multiple solutions when the investment has positive cash flow one year and a negative cash flow the next year.
- Direct Capitalization Method
- Best used when the investment's net operating income is stable.
NPV > 0
then IRR > required rate of return
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