What are some advanced methods for calculating ROI?
Advanced ROI calculation methods include the use of Net Present Value (NPV), Internal Rate of Return (IRR), and Economic Value Added (EVA). Would you like to dive deeper into any of these?
Can you explain how NPV works?
Sure! NPV calculates the difference between the present value of cash inflows and outflows over a period of time. It helps assess the profitability of an investment.
What factors should I consider when calculating NPV?
Key factors include the discount rate, the time period of cash flows, and the expected cash inflows and outflows. Accurate estimates are crucial for a reliable NPV.
How does IRR differ from NPV?
IRR is the discount rate that makes the NPV of an investment zero, while NPV provides a dollar value of profitability. They are used together for better investment analysis.
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