Thinking about a discounted cash flow whose IRR is 20% per year for a 3-year project. If things go exactly as projected cash flow, after three years if you calculate ROIC using the balance sheet, will it give 20%?
In other words, compare ROIC of a project throughout its life with initially projected IRR is the correct metric for assessing if a project is going according to plan?
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No, first of all typically one is utilizing some form of accounting earnings in calculating ROA/ROE/ROIC type metrics, whereas IRR is based on cash flows.
Secondly a 20% IRR does not imply a 20% return each year. The return on capital in the third year may be very different than the return over the three years combined.
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