IRR vs Discounted Pay Back Methods

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  • August 2, 2012 at 12:57 am #172941
    Anonymous
    Inactive

    Can anyone tell me what the difference is between these methods? I have the same formula for these:

    Investment / PV of After Tax Cash Flow

    Thanks in advance.

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  • August 2, 2012 at 2:29 am #358667
    Mr. Mini
    Member

    The primary difference you need to be aware of is that the discounted payback method calculates the TIME required for you to make your investment back (it also takes into account the time value of money) and the IRR method is calculating the required rate of return (expressed as a PERCENTAGE) on a particular project.

    August 2, 2012 at 2:39 am #358668
    Anonymous
    Inactive

    Mini…you're good!

    August 2, 2012 at 2:41 am #358669
    Mr. Mini
    Member

    That's what she said! 😉

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