A Limitation of the Internal Rate of Return Method Is

question 5

Multiple Choice

A limitation of the internal rate of return method is that it:

• A)Does not consider the time value of money.
• B)Measures results in years.
• C)Lacks ability to compare dissimilar projects.
• D)Ignores varying risks over the life of a project.
• E)Measures net income rather than cash flows.

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Definitions:

Accounting Records

Documents and books that systematically capture all financial transactions of a business, serving as the foundation for its financial statements.

Adjusting Entry

Accounting entries made to update the records for accruals and deferrals that were not recorded during the accounting period.

Bank Loan

A sum of money borrowed from a bank that is expected to be repaid with interest.

Interest Due

The amount of interest payment that must be paid at a scheduled date for borrowed funds.