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:

Hypothalamus

Found beneath the thalamus, it is a central area in the brain that governs both the autonomic nervous system and pituitary gland activities, thereby regulating critical homeostatic mechanisms such as body temperature, thirst, hunger, and other systems vital for bodily homeostasis.

Limbic System

A complex system of nerves and networks in the brain, involved with instinct and mood. It controls the basic emotions (fear, pleasure, anger) and drives (hunger, sex, dominance, care of offspring).

Visceral Organs

Internal organs of the body, especially those within the chest (such as the heart or lungs) or abdomen (such as the liver, pancreas, and intestines).

Hypothalamus

A small region of the brain's diencephalon involved in hormone regulation and many vital processes, such as temperature control and hunger.