**But net present value (NPV) has the following limitations for evaluating a project:**


### **2.5 Internal rate of return analysis**

Internal rate of return discounts all the cash back, providing zero NPV throughout the investment life of the project [9].

$$NPV = -\mathbb{S} + \sum\_{J=1}^{T} \frac{CF\_J}{(\mathbf{1} + IRR)^j} = \mathbf{0} \tag{6}$$

This method uses a widely understood percentage rate as the decision variable to compare mutually exclusive investments or individual investments whether public or private. Incremental internal rate of return analysis is preferred to individual analysis by analysts.

**Internal rate of return method for project economic analysis has the following merits:**

