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NPV vs IRR | Similarities and Differences. Similarities of Net Present Value and Internal Rate of Return. The following are some of the similarities between Net Present Value (NPP) & Internal Rate of Return (IRR). 1. Both are modern techniques of capital budgeting. 2. Both are considering the time value of money. The concept of the Internal Rate of Return is quite simple to understand. Suppose that you invest $10,000 in a bank today and you will be getting $10,800 after one year. In this case, IRR will be: IRR = $10,800 – $10,000 / $10,000 = $800 / $10,000 = 8%. IRR, in other words, is the rate of return at which the Net Present Value of an investment Expression of both terms is different from each other. IRR is expressed in percentage while NPV is expressed in terms of currency. NPV stands for “Net Present Value” While IRR stands for “Internal Rate of Return”. NPV is preferred over IRR as NPV calculates additional wealth. NPV is capable to calculate the additional wealth while IRR does not.

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