Perhaps the Greatest Disadvantage of Using the IRR Method to Evaluate

question 76

Multiple Choice

Perhaps the greatest disadvantage of using the IRR method to evaluate investment opportunities is:

• A) dealing with uncertain cash flows from the project.
• B) the assumption that all cash flows from the project will be reinvested at the IRR.
• C) the inability to calculate most IRRs without a computer.
• D) the need to compare IRR with the firm's cost of capital which cannot be estimated precisely.
• E) the fact that the technique does not account for risk.

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Definitions:

Target Markets

Specific groups of consumers a business aims to reach with its products or services, identified by characteristics like age, income level, or location.

Direct Investment

Putting money into a business venture, property, or other investments in a foreign country, aiming for a controlling interest.

Ownership

The state or condition of legally possessing an object, property, or enterprise.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.