Comparative Study of Techno-economic Evaluation Methods: NPV and IRR as Examples

Abstract

The NPV method and the IRR method are two methods that enterprises often use when making investment analysis. NPV and IRR are the most used indicators for financial feasibility evaluation of investment production, but there are many conflicts in practical application. This paper compares the two evaluation indicators, explains the reasons for the contradiction with specific examples, and analyzes what more scientific evaluation indicators should be used in different situations. The meaning of this research is to find out the way of using NPV and IRR to make technical and economic evaluation on different projects. Technical and economic evaluation refers to the evaluation of the economy of the project scheme by using a series of evaluation indicators and criteria in a certain procedure and manner, so as to determine the economic feasibility and rationality of the project scheme, and to select the best investment project scheme that is technologically advanced and economically reasonable. In the technical and economic evaluation, the criteria for evaluating economic benefits should be reasonably determined.