Publication: When and How to Use NPV, IRR, and Modified IRR
Date
2005-01
ISSN
Published
2005-01
Author(s)
Mackie, Peter
Nellthorp, John
Laird, James
Abstract
The Economic Evaluation Notes are
arranged in three groups. The first group (TRN-6 to TRN-10)
provides criteria for selection a particular evaluation
technique or approach; the second (TRN-11 to TRN-17)
addresses the selection of values of various inputs to the
evaluation, and the third (TRN-18 to TRN-26) deals with
specific problematic issues in economic evaluation. The
Notes are preceded by a Framework (TRN-5), that provides the
context within which we use economic evaluation in the
transport sector. All three NPV, IRR, and modified IRR are
summary measures of project performance. Each one provides a
single figure summarizing the impact of the project on
economic welfare. Each of the three measures does, however,
give subtly different information: 1) NPV focuses on the
total welfare gain over the whole life of the project; and,
2) IRR and Modified IRR focus on the rate at which benefits
are realized following an initial transport investment.
Citation
“Mackie, Peter; Nellthorp, John; Laird, James. 2005. When and How to Use NPV, IRR, and Modified IRR. Transport Notes Series; No. TRN 6. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/87bb1b46-c035-5ee2-818a-800703f7af80 License: CC BY 3.0 IGO.”