Why npv criteria is superior than irr?

The Net Present Value (NPV) criteria is superior to the Internal Rate of Return (IRR) because NPV provides a direct measure of the value added by an investment in monetary terms, reflecting the actual increase in wealth. Unlike IRR, which can yield multiple rates for projects with non-conventional cash flows or fail to consider the scale of investment, NPV consistently prioritizes projects that maximize shareholder value. Additionally, NPV accounts for the cost of capital and inflation, ensuring that cash flows are evaluated in present terms, leading to more informed decision-making.