Although the NPV method is technically superior, the IRR method is used more frequently.

Question

Quizplus · Accepted Answer

This is because the IRR method is simpler to understand and communicate, and it gives a percentage return on investment which is easier to compare across different projects or investments. Additionally, in some cases where the cash flows are non-standard, the IRR method may be more appropriate. However, it is important to note that the NPV method is theoretically the better method as it takes into account the time value of money and provides an absolute dollar value of the project's profitability.

Although the NPV Method Is Technically Superior, the IRR Method