What is the major disadvantage of the internal rate of return method?
A)It complicates the comparison of projects of the different sizes.
B)It can produce more than one internal rate of return.
C)It discriminates against long-term projects.
D)It ignores the time value of money.
E)It ignores the expected service life.

Question

Quizplus · Accepted Answer

The major disadvantage of the internal rate of return (IRR) method is that it can produce more than one IRR for projects with alternating cash flows (i.e., cash flows that change from positive to negative or vice versa throughout the project's life). This can make the IRR method difficult to interpret and apply in these situations.

What Is the Major Disadvantage of the Internal Rate of Return