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by CrazyCatDog
1510 days ago
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Right. IRR has a number of problems, though many stem from the fact that it reports a percentage. Npv/economic value added/etc. will yield one level per investment. And while you can sum these values for an aggregate, it’s not helpful to compare the npv of one investment for the other, because the fact that you have an NPV limits the risk of misinterpreting the investment as SCALEABLE. Some opportunities truly are finite, and cannot scale up—but if I were using irr to measure the value of selling my daughter painted Easter eggs, you’d think I have an investment of a lifetime—only to realize she has $35 stashed away, and is 10+ (hopefully 20+) years away from applying for credit! |
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