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What Are Some Potential Problems in Using Internal Rate of Return

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What are some potential problems in using internal rate of return (IRR) for mutually exclusive projects?


Definitions:

Economic Model

A simplified representation of economic processes, typically using mathematical formulas, to understand and predict economic behaviors.

Scientific Method

A systematic process of questioning, data collection, analysis, and hypothesis testing used to explore observations and answer questions.

Economic Model

A theoretical construct that represents economic processes by a set of variables and a set of logical or quantitative relationships between them.

Economic Conditions

The state of various factors that influence an economy at a given time, including inflation rates, unemployment levels, and the rate of economic growth.

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