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What Financial Metrics Should Be Used?
Financial metrics are critical in evaluating business options. Key metrics include:
-
Return on Investment (ROI)
: Measures the profitability of an investment.
-
Net Present Value (NPV)
: Calculates the value of future cash flows in today's terms.
-
Payback Period
: The time it takes to recover the initial investment.
-
Internal Rate of Return (IRR)
: The discount rate that makes the NPV of cash flows zero.
These metrics provide a quantitative basis for comparison.
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