The Advantages & Disadvantages, IRR Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -16

8.1           THE ADVANATAGES & DISADVANTAGES, IRR METHOD

• Internal profitability rate method, the investment projects that consider account the time value of money is a dynamic method. For the reason that IRR do not have the drawbacks as the static methods in this direction.
• The IRR is a method, which evaluate the time factor and the useful life at the investment projects. In addition, it estimates that the cash outflows and inflows provided the investment are compared each other by reducing at the same time level by IRR method.
• One of the other features of this method is to help to decide the rational investment especially in high inflation rates countries.
• The reason for that It includes the all investment expenditures and the all useful life of the investment incomes, it helps to get more healthy decisions.
• Sometimes, Internal rate of return method helps to prefer the projects, which have the useful life of the investment projects in a short but high profitability rate in spite of long useful life, whereas a lower rate of return.
• Years as the investment income is provided by the continuous cases, there is no problem in the calculation of internal rate of return.
• However, as some situations that there is no income and only cash-out at certain times, serious difficulties can be encountered to calculate the IRR, in some cases may not be possible to calculate the internal rate of return.

The Advantages & Disadvantages, NPV Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -12

7.1           THE ADVANTAGES & DISADVANTAGES, NPV METHOD

Some of the advantages of Net Present Value is as below:

• Evaluation of investment projects, it is important that to consider the time value of money in the calculations. This aspect gives a particular advantage to NPV method.
• NPV method, it has great importance to calculate the discount rate for further calculation that the present value determination.
• To be low or high of this rate affect the decision of the investment projects.
• If this rate is determinated high, large cash inflow investments will be prefered at the beginning years of the project life.
• If this rate is determinated low, Large cash inflow investments will be preferred at the end of the project life.
• The determined and used discount rate at the NPV method is used without changing in the useful life of all revenues.
• However, affecting the determination of pensionable discount; resource cost, profit rate, the interest rate in the economy and so on. factors would be changed in a time. Therefore, for a long period of time with a single discount rate reduction decision-making process can be accurate in some cases blocking properties.
• Each year, with different discount rates to calculate NPV is difficult to estimate as accurately as the rate of discount for each year is also a hassle.
• NPV method of investment projects over a certain discount rate, are intended to maximize the present value.

The Advantages & Disadvantages, ARR Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -10

6.3 THE ADVANTAGES & DISADVANTAGES, ARR METHOD

The ARR has some disadvantages which are related with the project profits timing. The capital is reserved until starting the project to get more benefit. Investors have to be awake of the advantages of before the time repayments that will use for other projects.

Some other disadvantages are as below:

• Profits are more important than the cash flows for ARR method. 
• This method prefers the relative measure than the absolute.
• The ARR technique deny the money value timing

In addition, some advantages:

•   Easy and clear method to apply
•  Financial statements help to estimate the profits
•  The ARR method is effective in all life of the project
•  The ARR technique is based on the profit concept; therefore, it is clear to    understand the benefits of the appraisal method for workers.
•  It is easy to match and compare more than one project in this method.

Advantages, The Payback Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -7

5.2 ADVANTAGES, THE PAYBACK METHOD

The main capital of the investment is reserved at the payback method.

• Sometimes payback can increase liquidity if it is before the time.
• While payback period is more than its time, there can be investment risk.
• Most of time, short term predictions are more trustworthy than long term.
• Payback period calculation is rapid and easy.
• Payback method is clear and simple to understand.