Explain the Internal Rate of Return (IRR)method of Evaluating Investment

question 121

Essay

Explain the Internal Rate of Return (IRR)method of evaluating investment proposals.What are the advantages and disadvantages of this method in comparison with the other methods discussed in the text?

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Definitions:

Mean

The average of a set of numbers, calculated by adding all the numbers together and dividing by the count of those numbers.

Sampling Error

Differences between statistics calculated from a sample and statistics pertaining to the population from which the sample is drawn due to random, chance factors.

Confidence Interval

A sequence of values, from sample statistic studies, expected to encase the value of a population characteristic not yet revealed.

Confidence Interval

A spectrum of numbers obtained from sample observations which is expected to include the value of an unidentified population parameter, given a certain confidence degree.