Net Present Value As a Decision Tool During Investment: Evaluating the Effectiveness of Net Present Value (NPV) Against Traditional Investment Appraisal Techniques in Predicting the Financial Success of Technology Startups
Year: 2025
Type: article
Abstract: This work studies whether the net present value (NPV) is a more effective investment appraisal tool than other traditional methods like internal rate of return (IRR) and payback period in forecasting the financial success of tech startups. The major task for financial forecasting is due to volatility, fast growth of tech startups, varying consumer preferences. Our study assesses these valuation methods not only by statistical regression analysis but also by examining various companies like Airbnb and Booking.com as a case study. The findings indicate that although NPV can be very informative about financial performance in the long run, the analysis is enriched when IRR and period of return are also included. Using this holistic method in technology investment valuation should minimize risk and improve decision-making, especially in the high-risk field of rapidly growing technology firms.
Authors: Jiayi Lin, Junhao Dong, Yihan Zheng
Institution: Tulane University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4414256516
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