Lingo Explained : ROI, NPV, IRR

When talking about projects, you often see the following terms popping up ; ROI, NPV & IRR. Yet what do they mean?

ROI

• Abbreviation : Return On Investment
• In Short : The ROI will give you an indication how fast you will have a return on your investment. It’s mostly expressed in a period of years, when calculating with costs related to a year.
• Wikipedia : http://en.wikipedia.org/wiki/Return_on_investment
• Formula :
  

  return on investment = (gain from investment – cost of investment) / cost of investment

• Video : Youtube

NPV

• Abbreviation : Net Present Value
• In Short : NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.
• Wikipedia : http://en.wikipedia.org/wiki/Net_present_value
• Formula :
  

  

• Video : Youtube

IRR

• Abbreviation : Internal Rate of Return
• In Short : The IRR will indicate the “interest” you get from an investement. It’s often used as a metric to see if money shouldn’t be kept with the finance institution instead of within a (risky) investment.
• Wikipedia : http://en.wikipedia.org/wiki/Internal_rate_of_return
• Formula :
  

  Check here…

• Video : Youtube

And how does that related to decision making?