The main reason that the net present value (NPV) method is regarded as being conceptually superior to the internal rate of return (IRR) method for the purpose of evaluating mutually exclusive investments, is that mutually exclusive projects have multiple internal rates of return (IRRs).

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The main reason the NPV method is considered superior is that it directly measures the increase in value to the firm, taking into account the scale of the investment and the time value of money, whereas the IRR method can be misleading when comparing projects of different sizes and timings of cash flows. Multiple IRRs can occur but are not the primary reason for NPV's conceptual superiority in evaluating mutually exclusive investments.

The Main Reason That the Net Present Value (NPV) Method