Time-disparity Problem

The mutually exclusive proposals may differ on the basis of the pattern of cash flows generated, although their initial investments may be the same. This may be called the time-disparity problem. The time-disparity problem may be defined as the conflict in ranking of proposals by the NPV and IRR methods which have different patterns of cash inflows. In such a situation like the size-disparity problem, the NPV method would give results superior to the IRR method.

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