The internal rate of return does NOT take into account the ____.
A) explicit risk of the net cash flows
B) magnitude of cash flows over the project's life
C) net investment
D) timing of cash flows over the entire life of a project

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) only considers the timing and magnitude of cash flows over the entire life of a project. It does not take into account the explicit risk of the net cash flows. The net investment is already factored into the IRR calculation as it represents the initial cash outflow at time zero.

The Internal Rate of Return Does NOT Take into Account