Business Commons^™

Present Net Worth And Internal Rate Of Return: A Note On Equivalence In Use, K. A. Blatner, Steven H. Bullard

Faculty Publications

Present net worth and internal rate of return are frequently used for ranking investment alternatives. The relative merits and limitations of the two criteria are discussed at length in numerous journal articles and texts. For analysts wishing to present consistent project comparisons, the issue is not which criterion is superior, but when are they equivalent. In this article, conditions for equivalence in use are outlined under alternative assumptions. Although the conditions appear complex, they are not unduly restrictive.