What are NPV and IRR？

NPV (Net Present Value) and IRR (Internal Rate of Return) are two financial metrics used to evaluate the profitability of an investment or project.

NPV is the difference between the present value of cash inflows and the present value of cash outflows over a specific period of time. It is used to determine whether an investment or project is profitable by calculating the present value of future cash flows and comparing it to the initial investment. If the NPV is positive, the investment is considered profitable.

IRR, on the other hand, is the rate at which the net present value of cash inflows equals the net present value of cash outflows. It is used to determine the potential profitability of an investment by calculating the rate of return that the investment will generate. If the IRR is greater than the required rate of return, the investment is considered profitable.