Why Is the Internal Rate of Return (IRR)inadequate When Comparing

question 133

Essay

Why is the internal rate of return (IRR)inadequate when comparing mutually exclusive investments of different scale?

Recognize the time lags associated with the approval and implementation of fiscal policy.

Identify and explain the concepts of stagflation and political business cycles.

Comprehend the role and effects of fiscal policy during historical periods, including the Golden Age of the 1960s and the Reaganomics.

Evaluate the effectiveness of supply-side economics and its policies.

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Definitions:

Debt Rating

An assessment of the creditworthiness of a debtor, usually in the form of a code or letter grade, provided by credit rating agencies.

Cost of Capital

The return rate that a company must earn on its investment projects to maintain its market value and satisfy its creditors and investors.

Market Value

The current value at which the market facilitates the sale or purchase of a service or asset.

WACC

Weighted Average Cost of Capital; a calculation used to assess the cost of a company's financing by averaging the costs of its equity and debt, weighted by their respective proportions in the company's capital structure.