What are some of the other methods that are used to evaluate investment projects and why are they inferior to NPV? 

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Payback Period and Internal Rate of Return (IRR) are two other methods that can be used to assess investment projects. Payback Period is a method of calculating how long it will take for an investment project to “pay back” the initial capital outlay, while IRR determines the profitability of a project by comparing the present values of cash inflows and outflows over the life of an investment. Both methods can be useful but they lack the ability to account for all costs and future cash flows. Both methods do not account for the opportunity cost, which is what might have been accomplished if funds were used elsewhere. NPV however, takes these aspects into account and makes its evaluation more thorough and precise than any other method.

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