Difference between IRR and NPV arise due to the following reason:

1. NPV assumes that the intermediate cash inflows are reinvested at a rate that is equal to the
firm’s cost of capital. On the other hand, IRR assumes that the intermediate funds are
reinvested at the projects IRR rate.
2. Projects with cash inflows that arrive in its early life will not be particularly sensitive to changes
in discount rate. On the other hand, projects with cash flows that arrive in its later life will
fluctuate more to the changes in discount rate. NPV favors project with early cash flows when
the cost of capital is low. Timing of cash flow does not affect ranking provided by IRR method.
WAAC is high
3. Scale of initial investment:
4.