Which of the following is not a quality of IRR ?
Correct answer: B. Ideal to rank the mutually exclusive investments
- A. Most widely used
- B. Ideal to rank the mutually exclusive investments
- C. Easily communicated and understood
- D. Can be estimated even without knowing the discount rate
Explanation
IRR should not be used as an ideal ranking method for mutually exclusive investments because it can conflict with NPV and may produce misleading rankings. It is widely used, understandable, and can be calculated without first specifying a discount rate.
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