Results obtained by employing the net present value (NPV) and the internal rate of return (IRR) methods allow to objectively determine the effectiveness and attractiveness of an investment project and to compare investment projects differing in scope, length or the amount of expected profit. While results obtained by the NPV and IRR methods normally correlate, contradictions are possible in individual cases. Such contradictions are called ‘conflict between the IRR and NPV methods’. The paper deals with the main characteristics of NPV and IRR, analysing the substance of the conflict and cases of its manifestation. A technique for the resolution of the NPV and IRR conflict is proposed.

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Santrauka. Straipsnyje nagrinėjamas vienas iš dažniausiai taikomų investicinių projektų efektyvumo vertinimo metodų -grynosios dabartinės vertės metodas (NPV). Autorius pateikia pagrindines NPV charakteristikas ir skaičiavimo prielaidas. Ypatingas dėmesys skiriamas specifinių NPV skaičiavimo atvejų analizei, kuria remiantis formuojama nuosekli metodika, leidžianti atlikti objektyvų investicinio projekto įvertinimą. Siūloma NPV skaičiavimo metodika grindžiama trijų pagrindinių kintamųjų parametrų įtakos vertinimu galutiniam rezultatui: 1) grynojo pinigų srauto; 2) vertinamo laikotarpio trukmės ir analizės intervalo; 3) diskonto normos.Reikšminiai žodžiai: grynoji dabartinė vertė, diskonto norma, kapitalo sąnaudos, pinigų srautas, investicinis projektas, investicinių projektų efektyvumo vertinimas. EVALUATION OF INVESTMENT PROJECTS' EFFECTIVENESS BY THE NET PRESENT VALUE METHOD Vladislav Tomaševič Vilnius University, Saulėtekio al. 9, LT-10222 Vilnius, Lithuania E-mail: research@prime-systems.eu Received 21 May 2010; accepted 23 August 2010Abstract. The paper examines one of the most widespread methods of evaluating effectiveness of investment projects -the net present value (NPV) method. The author presents main NPV characteristics and assumptions for calculation. The focus is on the analysis of specific cases of NPV calculation. The analysis forms the basis for the development of a consistent technique of objective evaluation of investment projects. The proposed NPV calculation technique is based on the assessment of the effect of three main variables on the final result. The variables include 1) net cash flow; 2) length of the period considered and the interval of analysis; and 3) discount rate.Keywords: net present value, discount rate, cost of capital, cash flow, investment project, evaluation of investment projects.

Evaluation of investment projects is a complex multilateral process which also entails a great responsibility as its results form a basis for adopting investment decisions. These decisions, to a large extent, depend on the reliability and justification of the evaluation results: therefore, the process must be based on clear logic, acceptable assumptions and the duly selected methods that have been tested in practice. The paper contains an overview of the main principles of investment projects' evaluation and a detailed analysis of the main requirements for the model architecture and its evaluation process.The authors propose a model for evaluating the economic efficiency of investment projects that has been described in detail and tested in practice. The model consists of a coherent evaluation scheme made of three phases and detailed algorithms of internal procedures. Such an architecture of the model enables a comprehensive analysis of investment projects of different types and a validation of the objectivity of evaluation results.