You buy a new piece of equipment for 16980 and you receive a cash inflow of 3000 per year for 12 years

Several different procedures are available to analyze potential business investments. Some concepts are better than others when it comes to reliability but all provide enough information to get the general scope of the investment. The IRR is the discount rate that makes the NPV of an investment zero. An investment should be accepted if it is higher than the required return; if it is lower, the project is not acceptable. The IRR can be a problem if cash flows are not conventional or when in this case with multiple projects to compare, the IRR can be misleading and not provide the actual best investment. With mutually exclusive investment decisions, it is best to choose the one with the largest NPV not necessarily the one with the largest IRR.