Finance 5 discussion | Business & Finance homework help
This conflicting situation can occur because the NPV and IRR methods measure profitability in different ways. The NPV method looks at all cash flows associated with a project by discounting them to their present value, whereas the IRR relies on the internal rate of return (the rate at which future cash flows will yield zero net present value). As such, these two methods can generate different results even when given the same set of assumptions. For example, if a project has unequal periodic cash flows or multiple discount rates then it’s possible for both measures to produce conflicting conclusions.