- A monthly-based IRR is imperative for a development analysis, but how useful is it for calculating a longer-term hold? If you have made monthly projections, then on the margin, a monthly-based IRR is always the better one to use. The more granular your cash flows, the more reflective of the business and cash flow realities of the transaction, and the more precise your IRR projection will be.
- How do I use IRR to attract investors? There is an investor for most every type of investment, so really the question to ask is: to which types of investments do I have access, and what level IRRs will they generate? From there, you can get control one of those potential investments, and then find an investor whose risk profile matches the nature of what you have to offer them.
- Could a positive NPV amount be viewed as “value already created” if all assumptions hold true? The operative word in the question is “if”… unfortunately nobody knows the future, so at the end of the day we’re all just placing educated bets. Don’t look at the positive NPV as value already created, but rather, value to hopefully eventually be harvested over the course of the investment timeline by paying very close attention to the investment and striving your hardest to navigate all the known and unknown future risks.
What other questions can I answer for you about IRR and NPV? Happy to help.