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

question 40

Essay

Why is the internal rate of return (IRR)inadequate when comparing mutually exclusive investments with different timing of the cash flows?

---

Definitions:

Unimodal

A distribution with a single peak or mode.

Skewed

Describes a distribution that is not symmetrical, with data points clustering more on one side of the mean than the other.

Symmetric

In mathematics, describing a shape or system that is identical in form on both sides of a central axis.

Histogram

A graphical representation of data that groups the data into ranges or bins and displays the frequency of data within each range using bars.