For IRR calculation WHICH ONE IS CORRECT ?

Question

For IRR calculation ( related to bank loan financing) We have to calculate cash inflow and cash outflow . Now what does cash inflow ACTUALLY mean -- Is it NET PROFIT as per P&L a/c + DEP.
OR
"Cash Generarted from OPERATION " as per cash flow statement?

Answer 1

Both are acceptable, but the Cash Generated from Operation is the better one to use when underwriting deals.