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1. Which ROI technique provides an answer in the form of an equivalent interest rate?
Working Capital Turnover.
Internal Rate of Return.
2. What is the difference between the NPV and IRR calculation?
Both use the same basic formula. NPV uses the annual cash flows to calculate a sum. IRR uses the cumulative cash flows to calculate a trend.
Both use the same formula. NPV uses a net value for cash flows that combines cost and benefit. IRR uses an internal value of cash flow that only includes costs.
Both use the same basic formula involving the sum of discounted annual cash flows. NPV sets a discount rate and solves for the value. IRR sets the value to zero and solves for the rate.
3. Which ROI techniques rely on discounted cash flow?
Payback Period and Breakeven Point.
Net Present Value and Internal Rate of Return.
Free Cash Flow and Working Capital Turnover.
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