Another major characteristic of NPV is that they cannot be straightforwardly originated in the market, so they need to be estimated. Since there’s always the possibility of a poor estimation, financial managers need to use a number of other criterions for project evaluation for additional information regarding whether or not an investment has a positive NPV indeed. (fundamentals corporate finance)
Internal rate of return and payback period are the major evaluation tools used by supervisors as an alternative to NPV. It might be feasible to use mentioned methods during evaluation process as well, however each of these methods has very significant shortcomings. For example: Major drawback of IRR is that it states the result in terms of percentage rather than through monetary amounts (variances in scale). Comparison through only percentage results while considering the overall purpose of maximization of shareholders’ wealth can be