The internal rate of return (IRR)method favors investment proposals with:

Question

Quizplus · Accepted Answer

The IRR method favors investment proposals with long useful lives because this method calculates the rate of return that makes the present value of future cash flows equal to the initial investment, assuming all cash flows are reinvested at the IRR. Therefore, investments with long useful lives have more years to generate cash flows and achieve the required rate of return. Short useful lives and large initial investments may reduce the IRR, and moderate cash flow returns and large residual values may not have a significant impact on the IRR.

The Internal Rate of Return (IRR)method Favors Investment Proposals With