Final answer:
Option A, that IRR is conceptually easy to communicate, is not a shortcoming of the IRR method. It's a strength since it is straightforward for stakeholders to understand. The other options listed are indeed considered shortcomings of the IRR method.
Step-by-step explanation:
The question is asking which of the listed items is not a shortcoming of the internal rate of return (IRR) method used in capital budgeting to assess the profitability of potential investments.
A. IRR is conceptually easy to communicate. This is indeed considered a strength of the IRR method, as it expresses the profitability of a project as a percentage, which is easily understood by managers and investors.
B. Projects can have multiple IRRs. This is true, especially for projects with alternating cash flows (positive and negative over time), which is a limitation as it can make the IRR ambiguous or misleading.
C. IRR cannot distinguish between a borrowing project and a lending project. This is another limitation of the IRR method because it assumes that intermediate cash flows are reinvested at the project's IRR, which might not be realistic.
D. It is very cumbersome to evaluate mutually exclusive projects using the IRR method. This is because two projects may have the same IRR but drastically different cash flows, scale, or duration.