NPV vs IRR | Similarities and Differences

Similarities of Net Present Value and Internal Rate of Return

The following are some of the similarities between Net Present Value (NPP) & Internal Rate of Return (IRR).

1. Both are modern techniques of capital budgeting.

2. Both are considering the time value of money.

3. Independent investment proposals which do not compete with one another and which may be either accepted or rejected on the basis of a minimum required rate of return. Under these circumstances, both methods gave same results.

4. Conventional investment proposals which involve cash outflows or outlays in the initial period followed by a series of cash inflows. Both methods gave same results under these circumstances.

Differences between Net Present Value and Internal Rate of Return

The following are some of the differences between NPV and IRR.

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