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Posted on:

12 Dec 2023


Second example for 'NPV and IRR' video

Hi! In the second example, project A has a return on the first year after investment with a lower NPV, and project B has a return on the fourth year after investment with a higher NPV. 

NPV size is important, I agree. But why would investors prefer project B (even with higher NPV), if in project B money will be frozen for 4 years (it also means the risk that the project fails/will be delayed is higher, right?), while in project A, it is only for 1 year (and after that 1 year they can reinvest in a new project, and earn more)?
Do you think that only NPV is important, and in such situations, investors don't take into consideration how many years the invested money will be withdrawn from turnover?

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