General Studies · Financial Management
Which of the following is considered a major drawback of the Internal Rate of Return (IRR) method compared to the Net Present Value (NPV) method?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1IRR is calculated using accounting profits rather than cash flows
- 2IRR is significantly harder to explain to non-financial managers
- 3IRR can produce multiple rates for projects with non-conventional cash flows✓
- 4IRR does not take into account the time value of money
Correct answer
IRR can produce multiple rates for projects with non-conventional cash flows
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