The Disadvantage of the IRR Method Is That

question 108

Multiple Choice

The disadvantage of the IRR method is that

• A) the IRR deals with cash flows.
• B) the IRR gives equal regard to all returns within a project's life.
• C) the IRR will always give the same project accept/reject decision as the NPV.
• D) the IRR requires long, detailed cash flow forecasts.

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Definitions:

Noncash Assets

Assets that cannot be easily converted into cash, including property, plant, equipment, patents, and trademarks.

Gain or Loss

The financial result of transactions that leads to an increase (gain) or decrease (loss) in the capital of an entity, not related to its primary operations.

Capital Balances

The amount of funds that each partner or shareholder has contributed to a company, not including any profits or losses retained in the company.

Partnership Liabilities

Obligations and debts that are shared by partners in a partnership arrangement.