3 ms·

So if not IRR, then what? It's not that IRR is bad, it is the imaginary/on paper/not realized interim IRR that is bad. It's like instead of counting how much c

by a_c 4y ago

So if not IRR, then what? It's not that IRR is bad, it is the imaginary/on paper/not realized interim IRR that is bad. It's like instead of counting how much customer are paying, we measure sign-ups, page visits, time on page, whatever. At times, these proxy metrics is the only thing we have so it is better than not having a metrics at all.

zeckalpha 4y ago
NPV?
- abakker 4y ago
  Net present value - essentially valuation that takes into account the discounted time value of money (money in the future is worth less than today, since you can’t use future money without borrowing at an interest rate, coupled with inflation)
  - zeckalpha 4y ago
    I am aware. I am suggesting it as an alternative to IRR.
CrazyCatDog 4y ago
Right. IRR has a number of problems, though many stem from the fact that it reports a percentage. Npv/economic value added/etc. will yield one level per investment. And while you can sum these values for an aggregate, it’s not helpful to compare the npv of one investment for the other, because the fact that you have an NPV limits the risk of misinterpreting the investment as SCALEABLE. Some opportunities truly are finite, and cannot scale up—but if I were using irr to measure the value of selling my daughter painted Easter eggs, you’d think I have an investment of a lifetime—only to realize she has $35 stashed away, and is 10+ (hopefully 20+) years away from applying for credit!