ECONOMICS

Detailed explanation-1: -Limitations Of IRR It ignores the actual dollar value of comparable investments. It does not compare the holding periods of like investments. It does not account for eliminating negative cash flows. It provides no consideration for the reinvestment of positive cash flows.

Detailed explanation-2: -A disadvantage of using the IRR method is that it does not account for the project size when comparing projects. Cash flows are simply compared to the amount of capital outlay generating those cash flows.

Detailed explanation-3: -Select one disadvantage of IRR as a capital budget method. It involves complex calculations that are not always reliable. It is only useful with projects that have negative cash ows. Projects of similar durations are not easily compared using IRR.

Detailed explanation-4: -Which one of the following is NOT a potential problem with the IRR approach to capital budgeting? The IRR cannot be used to rank mutually exclusive projects.