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Why is payback and IRR more frequently used than NPV when it comes to evaluating projects?
Solution
Payback is very simple to understand and cheap to implement and can be done very quickly to
give an idea.
IRR gives return in terms of percentage and management would like to see the returns because
then they are not biased with the size of the project. But NPV is biased with the size of the
project.

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Why is payback and IRR more frequently used than NPV when it comes t.pdf

  • 1. Why is payback and IRR more frequently used than NPV when it comes to evaluating projects? Solution Payback is very simple to understand and cheap to implement and can be done very quickly to give an idea. IRR gives return in terms of percentage and management would like to see the returns because then they are not biased with the size of the project. But NPV is biased with the size of the project.