The net present value (NPV) method and the internal rate of return (IRR) method are used to analyze proposed capital expenditures. The IRR method, as contrasted with the net present value (NPV) method: Multiple Choice is preferred in practice because it can handle multiple desired rates of return, which is impossible to do with the net present value (NPV) method. Is considered inferior because it fails to calculate compounded rates of return Almost always gives a different decision that the net present value (NPV) method as to the acceptability ("go" versus "no go") of a given proposed investment Incorporates the time value of money, while the net present value (NPV) method does not. Assumes that the rate of return on the reinvestment of the cash proceeds is at the indicated rate of return of the project rather than at the discount rate used.