CAT / FIA FFM Syllabus E. Investment Decisions - NPV v IRR - Notes ^{8 / 9}

The net present value (NPV) method has several important advantages over the internal rate of return (IRR) method.

NPV is often simpler to use. As mentioned earlier, IRR may require hunting for the discount rate that results in a net present value of zero.
This can be a very laborious trial-and-error process, although it can be automated to some degree using a computer spreadsheet.
A key assumption made by IRR is questionable. Both methods assume that cash flows generated by a project during its useful life are immediately reinvested elsewhere.
However, the two methods make different assumptions concerning the rate of return that is earned on those cash flow.
NPV assumes the rate of return is the discount rate
IRR assumes the rate of return is the internal rate of return on the project.
So, if the IRR is high, this assumption may not be realistic. It is more realistic to assume that cash can be reinvested at the discount rate - particularly if the discount rate is the company’s cost of capital. For example, by paying off the company’s creditors
In short, when NPV and IRR do not agree, it is best to go with NPV. Of the two methods, it makes the more realistic assumption about the rate of return that can be earned on cash flows from the project.

IRR has several weaknesses as a method of appraising capital investments. Since it is a relative measurement of investment worth, it does not measure the absolute increase in company value (and therefore shareholder wealth), which can be found using the net present value (NPV) method

There is a potential conflict between IRR and NPV in the evaluation of mutually exclusive projects, where the two methods can offer conflicting advice as which of two projects is preferable.
For example a small project may have a higher IRR but a lower NPV than a very big project.
Where there is conflict, NPV always offers the correct investment advice