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 NPV method:

Assumes (according to some commentators) that the rate of return on the reinvestment of the cash proceeds is at the indicated rate of return of the project analyzed rather than at the discount rate used.

Is preferred in practice because it is able to handle multiple desired rates of return, which is impossible to do with the NPV method.

Is considered inferior because it fails to calculate compounded rates of return.

Almost always gives a different decision that the NPV method as to the acceptability ("go" versus "no go") of a given proposed investment.

Incorporates the time value of money, while the NPV method does not.