Section outline

  • In real life, there are often various alternatives to implement a specific project. The standard NPV rule as presented in the preceding section works well if the available alternatives are very comparable, for example regarding the required investment and the duration of the project. That need not necessarily be the case. 

    In this section, we look at somewhat more complex investment decisions that involve project alternatives with very different characteristics. We learn how to adjust the standard NPV-rule to make projects comparable and to align the NPV criterion with alternative criterias such as the IRR rule.