Question

A limitation of the internal rate of return method is that it:multiple choicedoes not consider the time value of money.measures results in years.lacks ability to compare dissimilar projects.ignores varying risks over the life of a project.measures net income rather than cash flows.

Answer 1

A limitation of the internal rate of return method is that it ignores vary risks over the life project. Internal rate of return (IRR) is a tool companies use when they are capital budgeting to see what their potential profit is on an investment they are considering. When this method is used, they are typically seeing the benefits early on in the life span of the investment instead of really measuring the long term gains or losses on it.