Which of the following items describes a weakness of the internal rate-of-return method? Show
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It ignores the actual dollar value of comparable investments. It does not compare the holding periods of like investments. It does not account for eliminating negative cash flows. It provides no consideration for the reinvestment of positive cash flows.
Which of the following is a weakness of the internal rate of return method for screening investment projects?. A weakness of the internal rate of return method for screening investment projects is that it: implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return.
What is one of the biggest disadvantages to the internal rate of return method of capital investment analysis?IRR Calculation Complexities
One of the disadvantages of using IRR is that all cash flows are assumed to be reinvested at the same discount rate, although in the real world these rates will fluctuate, particularly with longer-term projects.
What are the key strengths and weaknesses of the internal rate of return method of assessing capital projects?The primary benefit of IRR is its simplicity: It's easy to calculate and easy to interpret the result. However, there are several drawbacks to this method. IRR only uses one discount rate, and the true discount rate can change substantially over time - especially if the investment is a long-term project.
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Which of the following is weakness of the internal rate of return method for screening investment projects?
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