IRR vs. NPV

Key Differences

IRR is used for evaluating the projects with changing cash flows but NPV is unable to evaluate the changing cash flows projects.

Harlon Moss

Dec 28, 2015

15

Expression of both terms is different from each other. IRR is expressed in percentage while NPV is expressed in terms of currency.

8

NPV stands for “Net Present Value” While IRR stands for “Internal Rate of Return”.

7

AS IRR method represents in percentage, so it is much more understandable by the manager with concepts of return.

Aimie Carlson

Dec 28, 2015

7

NPV is capable to calculate the additional wealth while IRR does not.

Janet White

Dec 28, 2015

6

NPV determines the surplus from the project while IRR determines the state of Break Even Point.

Aimie Carlson

Dec 28, 2015

6

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NPV is preferred over IRR as NPV calculates additional wealth.

5

While using NPV, you will found different recommendations when using different discount rates but for IRR the recommendations are always the same.

5

Decision making is quite easy by using NPV while IRR does not help for decision making.

Janet White

Dec 28, 2015

5

What is IRR?

IRR stands for “Internal Rate of Return” which is a tool used for capital budgeting. Capital budgeting is a process to evaluate the feasibility of the return on investment. It judges either the investment on a project will generate the expected profits or not. The proposed project should not be launched unless the value of IRR is positive. The higher value of IRR

What is NPV?

NPV stands for “Net Present Value”. It is a tool to calculate the difference between cash inflow and cash outflow of organization at present time. Probability is found byt NPV. It gives the estimated value estimated cost of any project at present time and after few years the cost of same project keeping in view the inflation rate and others factors. It is helpful to buy any company or organization.

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