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Difference between I R R and N P V
While both the I R R and N P V try to do the same thing for a company, there are subtle differences between the two that are as follows:
While N P V is expressed in terms of a value in units of a currency, I R R is a rate that is expressed in percentage which tells how much a company can expect to get in percentage terms from a project down the years.
N P V takes into account additional wealth while I R R does not calculate additional wealth
If cash flows are changing, I R R method can not be used while N P V can be used and hence it is preferred in such cases
While I R R gives same predictions, N P V method generates different results in cases where different discount rates are applicable.
Business managers are more comfortable with the concept of I R R whereas for general public, N P V is better for grasping.
