Gary E. answered • 01/27/23
30+ year financial professional and college adjunct prof
I would actually have both methods (IRR and NPV) available to present to whomever your audience will be. A financial manager who is unprepared and ill-informed may be looking for another job. However, as I'll explain later, my perspective is that NPV is a snapshot and deficient when it comes to explaining an ongoing or multi-year project to investors, all of whom know exactly what they want from their hard earned investment dollars.
Here's the "modern" perspective you're dealing with. In recent years, we've dealt with industry bubbles, Covid, possible recession, Fed actions, etc. Older investors have experienced similar and other types of situations before. Placing a one-time NPV on a project with so many unpredictable and unknown variables probably won't set well with investors who don't adhere to the old concepts of diversification, volatility, and accountability. There are investment opportunities today that didn't exist 20 years ago. Plus, technology has enabled just about anybody to keep track of the performance of current projects compared with alternatives. Conclusion: The comparative simplicity and flexibility of using IRR wins every time.
When and why would I present a study? Well, since one has to use current costs and rates, always have a plug-in method of making calculations so you'll be ready to make a presentation when the boss says so. Although you're attempting to persuade folks to turn loose of their money, assumptions and projections must be realistic. The older your investor group, the more experienced and informed they'll be so you may want to be prepared to offer the good, bad, and ugly of comparative examples and analyses.
