Understanding the relationship between NPV and IRR The NPV and IRR methods are interrelated and are sometimes used together to make capital budgeting decisions. Consider this case: General Products Co. lost a lot of its accounting information because of a problem with its electronic record-keeping system. Its CFo knows that the IRR of project Alpha is 11.3%; however, the CFO does not know how much General Products Co. originally invested in the project. The cash flows for project Alpha are listed as follows: The finance team is trying to calculate the initial investment using the information available to them. IRR Cash Flow Year is the cost of capital at which NPV equals $0. Using this Year 1 $375,000 information, the initial investment of the project turns Year 2 $475,000 out to be $475,000 Year 3 Project Alpha has the same risk as a firm's average $475,000 Year 4 project. The company has a WACC of 10%. Based on this information, the project's NPV is