Comparison between modern and traditional methods, Finance Basics

Comparison between Modern and Traditional Methods

Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose a viable venture and for this purpose the choice of the investment will depend on that method the company has recognized it can meet its investment requirements.  The selection should not be limited to one method however at least 2 modern methods.  During all, when ranking projects, a conflict will increase between NPV and IRR especially beneath the following conditions as:

i)   If the lives of the projects are not same.

ii) Where the cash outlay is larger quite than another.

iii) When the cash flow pattern differs that is the cash flows of one project may overtime rise while those of the other reduce. During this case NPV may provide consistently correct solution especially hence as it does not yield multiple rates.

Posted Date: 1/31/2013 1:23:29 AM | Location : United States







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