Question

g Which of the following IS NOT an issue with alternative investment decision tools? Said another way, which of the following is a false statement? Group of answer choices IRR takes into account relative scale/size of cash flows IRR struggles to handle cash flows shifting from negative to positive to negative to positive Payback rule is simple and favors shorter term projects IRR does not take adequately into account relative timing of cash flows

Answer 1

IRR does not take adequately into account relative timing of cash flows

Step-by-step explanation:

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested .

When cash flows shift from negative to positive to negative to positive, it can lead to the multiple IRR problem

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

Payback does not take adequately into account relative timing of cash flows