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If the NPV of a project is positive, it should be accepted.

However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.

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The internal rate of return is defined as the discount rate where the NPV of cash flows are equal to zero.

Payback period also ignores all cash flows that occur after the payback period is reached.Changes in Discount Rates - the IRR rule tells us to accept projects where the IRR is greater than the opportunity cost of capital or WACC.But if this discount rate changes each year then it's impossible to make this comparison.3.Cons - Does not take into account the time value of money.Discounted cash flow should be the preferred way to evaluate payback since it does recognize the time value of money.IRRs Do Not Add Up - one of the strengths of the NPV approach is that if you need to add one project to an existing project you can simply add the NPVs together to evaluate the entire project.

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