The net present value method differs from the internal rate of return method because it does not determine the project's actual rate of return.

Question

Quizplus · Accepted Answer

The net present value (NPV) method calculates the present value of future cash flows minus the initial investment, focusing on the absolute dollar amount of return, whereas the internal rate of return (IRR) method calculates the actual percentage rate of return that equates the present value of future cash flows with the initial investment.

The Net Present Value Method Differs from the Internal Rate