The Two Fatal Flaws of the Internal Rate of Return

question 102

Multiple Choice

The two fatal flaws of the internal rate of return rule are:

• A) arbitrary determination of a discount rate and failure to consider initial expenditures.
• B) arbitrary determination of a discount rate and failure to correctly analyze mutually exclusive investment projects.
• C) arbitrary determination of a discount rate and the multiple rate of return problem.
• D) failure to consider initial expenditures and failure to correctly analyze mutually exclusive investment projects.
• E) failure to correctly analyze mutually exclusive investment projects and the multiple rate of return problem.

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Definitions:

Compiler

A software tool that translates code written in a high-level programming language into a lower-level language or machine code that can be executed by a computer.

High-Level Language

A programming language that is closer to human language, making it easier to read, write, and maintain code.

Machine Language

The lowest-level programming language, consisting of binary or hexadecimal codes that a computer's processor can execute directly.

Bit

The most basic unit of information in computing and digital communications, which can have a value of either 0 or 1.