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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

What are the major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals?

To determine

Internal rate of return method:

Internal rate of return method is the one of the capital investment method which determines the rate of return wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method also called as the time-adjusted rate of return method, and it used to evaluate the different proposal’s expected rate of return.

To discuss: The major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals.

Explanation

The internal rate of return method has the following two disadvantages:

  • It has complex steps for computation of rate of return ...

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