NPV -- This method takes into consideration the time value of money and attempts to calculate the return on investments by introducing the factor of time element. That is a cash flow arising at different periods of time differs in value and is not comparable unless their present values are found.

IRR -- It is also known as time adjusted rate of return discounted cash flow discounted rate of return yield method and trial and error method.

The internal rate of return can be defined as that rate of discount at which the present value of cash inflows is equal to the present value of cash outflows.