Use NPV when you already know the return you require. Use IRR when you want the project’s own rate.
Same cash flows, two questions
Net present value discounts each cash flow at a rate you choose and adds them up. Positive means the project clears that hurdle. Internal rate of return searches for the rate that would make the net present value zero. Neither one is a payback period, which ignores everything after the cost is recovered and treats a late dollar like an early one.
Put time zero first and make the investment negative. If the signs flip more than once, IRR can have more than one answer and the solver will say so. That is a feature. Switch to the NPV calculator and judge the project at the return you actually require.
Run the same question with your figures
NPV Answers in Dollars. IRR Answers with a Rate. points to the NPV Calculator because the note is about cash flows discounted at the rate you require. The form on that page asks for Discount rate per period (8%), Cash flows, time zero first (-20000 5000 7000 8000 9000). Its opening example produces Net present value is $3,596.93. Use the article to see which piece of the payment, the tax, or the balance the heading is talking about. Use the calculator when you want the same relationship with your own inputs. The two pages are not copies of each other.
NPV Answers in Dollars. IRR Answers with a Rate. points to the IRR Calculator because the note is about the rate that sets npv to zero. The form on that page asks for Cash flows, time zero first (-10000 2500 3000 3500 4000). Its opening example produces Internal rate of return is 10.48%. Use the article to see which piece of the payment, the tax, or the balance the heading is talking about. Use the calculator when you want the same relationship with your own inputs. The two pages are not copies of each other.
How to read this note
NPV Answers in Dollars. IRR Answers with a Rate. is one question, not a plan for every account you own. The opening claim is this: Use NPV when you already know the return you require. Use IRR when you want the project’s own rate. The sections above stay on that claim. They use a worked figure so the relationship is visible. A worked figure is not a prediction that your loan, your fund, or your tax year will match it.
Read the headings in order. Same cash flows, two questions. If a sentence names a calculator, that link is the place to change the inputs. If a sentence names a limit, the limit is the one published for the year written on the page, which is 2026 where this desk cites a retirement or tax figure.
A senior reading of a finance page looks for three things. The formula should match the labels. The example should be reproducible on the calculator. The page should say what it leaves out. This note tries to do those three. It does not tell you to borrow, to sell, to contribute the maximum, or to file a return from the illustration.
What the note leaves out
NPV Answers in Dollars. IRR Answers with a Rate. ignores facts it does not mention. Fees, state tax, a credit score, an employer match you have not typed, and a market that refuses to pay a flat rate are all outside the paragraph. When one of those facts is the actual question, open the calculator that asks for it or read the disclaimer before you move money.
Published 25 Oct 2026. If a public figure in the note is later revised by the IRS, a lender, or a data source, the calculator page and the methodology are the places this desk updates. The note does not store what you type, and it is not a message from a broker or a tax preparer.
Before you treat the example as yours
NPV Answers in Dollars. IRR Answers with a Rate. uses a specific illustration so the relationship is easy to see. The category is Investing. The tools sitting next to the note are NPV Calculator, IRR Calculator. Open one of them, replace the example, and press Calculate if the decision in front of you depends on your balance, your rate, or your income. The article does not update itself when those facts change.
A careful reading checks three matches. The heading should be the question you have. The worked number should use inputs you can point to. The omitted items, named above, should be irrelevant or added back in a field. If any of the three fails, do not stretch the conclusion. Use NPV when you already know the return you require. Use IRR when you want the project’s own rate.
Keep the note and the calculator apart in your notes. The note explains why the pieces move. The calculator shows how far they move once you type them. Publishing date 25 Oct 2026 is the version of the explanation you are reading. Public limits can change after that date, and the methodology is where this desk records the figures it is willing to stand behind.
FAQs
Are the lines yearly?
They are one period apart, whatever period you intend. Do not drop an annual hurdle rate onto monthly lines without converting it.
What is NPV Answers in Dollars. IRR Answers with a Rate. actually deciding?
Use NPV when you already know the return you require. Use IRR when you want the project’s own rate.
Where do I put my own numbers?
Open NPV Calculator or IRR Calculator. The article’s example is already explained. The calculator is the place to change the fields and press Calculate.
Does the example include every fee and tax?
Only the pieces the note names. Anything missing from the example is missing from the result. Add it in the matching field or treat the figure as incomplete.
Is this a recommendation?
No. NPV Answers in Dollars. IRR Answers with a Rate. shows a relationship so you can see it. It is not advice to buy, sell, borrow, or contribute. The disclaimer states that limit in one place.