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Capital Budgeting
?
Which of the following is not a shortcoming of the internal rate of return (IRR) method?
IRR assumes that funds generated from a project will be reinvested at an interest rate equal to the project’s IRR.
IRR does not take into account the difference in the scale of investment alternatives.
IRR is easier to visualize and interpret than net present value (NPV).
Sign changes in the cash flow stream can generate more than one IRR.
Show Result
Correct
- Your answer is correct.
Wrong
- Your answer is wrong.
Detailed Answer
Answer (C) is correct. IRR is widely used because of its simplicity.
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