NPV vs. IRR: with capital budgeting, which do you choose?
The standard that defines quality health care rises as new technologies and procedures become available. To the health care financial manager, maintaining quality health care becomes a twofold problem--how to keep up with the latest developments while staying within budget guidelines. Two methods of analyzing capital expenditures are available to the financial manager, IRR and NPV. The latter is the safest and most reliable. NPV takes into account present market conditions and neither penalizes nor overly rewards either the buyer or seller of a particular project. This article is the first of a two-part series on capital budgeting in health care and takes the financial manager beyond the pure arithmetic of NPV and IRR to show the depth and meaning behind the arithmetic.
D000067:Accounts Payable and Receivable; D002017:Budgets / Q000379:methods*; D002201:Capital Expenditures; D004467:Economics; D005249:Fees and Charges; D005376:Financial Management / Q000379:methods*; D005377:Financial Management, Hospital / Q000379:methods*; D008962:Models, Theoretical; D011787:Quality of Health Care / Q000191:economics*; D014481:United States