The Following Are Some of the Shortcomings of the IRR

question 43

Multiple Choice

The following are some of the shortcomings of the IRR method except:

• A) IRR is conceptually easy to communicate
• B) Projects can have multiple IRRs
• C) IRR method cannot distinguish between a borrowing project and a lending project
• D) It is very cumbersome to evaluate mutually exclusive projects using the IRR method

---

Definitions:

Perfectly Competitive

A market scenario characterized by an infinite number of buyers and sellers, freedom of entry and exit, and a product that is homogenous across all suppliers.

Constant-Cost Industry

An industry where the costs of production do not change as the industry's output changes.

Long-Run Equilibrium

A state in economic theory where all factors of production are fully adjustable, allowing for optimal resource allocation and full competition.

Increasing-Cost Industry

An industry in which production costs increase as the entire market expands production, often due to finite resources.