Which Three of the Following Statements Correspond to Limitations of the IRR

question 15

Multiple Choice

Which three of the following statements correspond to limitations of the IRR method, when compared with the NPV approach?

• A) Limits on the accuracy of rankings
• B) IRR does not give percentage results
• C) Confusion between investing- type and financing- type decisions
• D) The possibility of multiple solutions

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Definitions:

Dividend Revenue

Income earned from an investment in the form of dividends, typically from holding shares of another company.

Outstanding Shares

Outstanding shares refer to the total number of shares of stock that are owned by shareholders at any given time, including shares held by institutional investors and restricted shares held by company insiders.

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence over that company but does not fully control it.

Investee's Net Income

The total profit of a company in which another company has an investment interest, after all expenses and taxes have been subtracted.