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The internal rate of return is unreliable as an indicator of whether or not an investment should be accepted given which one of the following?
a) The cash flows are conventional.
b) The investment has cash inflows that occur after the required payback period.
c) The investment is mutually exclusive with another investment under consideration.
d) The initial cash flow is negative.

Respuesta :

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Answer:

c) The investment is mutually exclusive with another investment under consideration.

Explanation:

The main indicator as to whether or not accept a project or not is the net present value (NPV). Only projects with a positive NPV should be considered. On the other hand, the internal rate of return (IRR) has a couple of issues and is not that reliable because it does not consider the size of the projects, or associated future costs, or even the duration of the projects. The IRR is not a good method to evaluate long term projects.

So when you have to compare mutually exclusive projects, the IRR should not be considered due to the issues previously mentioned.

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