The elements that cause problems with the use of the IRR in projects that are mutually exclusive are referred to as the:
A)discount rate and scale problems.
B)timing and scale problems.
C)discount rate and timing problems.
D)scale and reversing flow problems.
E)timing and reversing flow problems.

Question

Quizplus · Accepted Answer

The issues with using the Internal Rate of Return (IRR) for mutually exclusive projects are primarily due to timing and scale problems. Timing problems arise because cash flows at different times can lead to multiple IRRs or misleading comparisons. Scale problems occur because the IRR does not account for the size of the project, making it difficult to compare projects of different scales directly.

The Elements That Cause Problems with the Use of the IRR