Question

an advantage of the internal rate of return method is that
a. it can rank proposals of equal lives.
b. it considers the time value of money.
c. it considers the cash flows of the investment.
d. all of these choices are correct.

Explanation:

• Option a: IRR can rank proposals with equal lives as it provides a rate of return for comparison.
• Option b: IRR inherently considers the time value of money by discounting future cash flows.
• Option c: IRR calculation is based on the cash flows (inflows and outflows) of the investment.

Since all a, b, and c are correct advantages of IRR, option d is the right choice.

Answer:

d. All of these choices are correct.