Advantagesand Disadvantages of IRR, Finance Basics

Assignment Help:

Advantagesand Disadvantages of IRR

Advantages of IRR

  • It seems time value of money
  • It seems cash flows over the whole life of the project.
  • It is compatible along with the maximization of owner's wealth since, if it is higher than the cost of finance, owners' wealth will be maximized.

 

Not like the NPV method, it does not employ the cost of finance to discount inflows and for this purpose it will indicate a rate of return of interval to the project against that various ventures can be assessed as to their viability.

Disadvantages of IRR

  • Difficult to utilize.
  • Expensive to use since it calls for trained manpower and may employ computers especially whereas inflows are of large magnitude and extending beyond the general limits.
  • It may give multiple results some involving positive IRR whether in case it may be difficult to utilize in choosing such venture is more viable.

Related Discussions:- Advantagesand Disadvantages of IRR

Mortgage payment, Mr. and Mrs. smith are considering the purchase of a hous...

Mr. and Mrs. smith are considering the purchase of a house. They can afford to make  a mortgage payment of $750 per month. If the current mortgage interest rate is 9% with monthly

Draw a budget constraint , The price of bread is $0.50 per pound, and the p...

The price of bread is $0.50 per pound, and the price of butter is $0.25 per ounce. Channing spends all of her income, buying 12 pounds of bread, 7 ounces of butter, and nothing els

Maturity on the bond, You buy a SML Bond for $980.  The bond has a face val...

You buy a SML Bond for $980.  The bond has a face value of $1000 and an yearly  coupon rate of 8%.  There are five years left until maturity. a. What is the yield to maturity on

Existence of quantity discounts, Existence of Quantity Discounts Recur...

Existence of Quantity Discounts Recurrently, the firm is capable to take benefits of quantity discounts.  Since these discounts affect the price per unit, they influence also

Scope of supply chain management, The scope of supply chain management  ...

The scope of supply chain management  Supply chain management includes the determination of suppliers; distributors, distribution channels and warehousing; manufacturing infor

Calculate the retrospective gross premium reserve, Question: A deferred...

Question: A deferred annuity policy is sold to a life aged 45 with the following benefits: • Basic payments start at $30,000 from age 65, increasing by $2,000 each year; •

Explain about the monetary role of banks, Explain about the monetary role o...

Explain about the monetary role of banks. The Monetary Role of Banks: • A bank is a financial intermediary. • Bank reserves are the currency banks hold within their va

Calculate the expected sale, 1. Suppose company A expects to increase unit ...

1. Suppose company A expects to increase unit sales of i-phone by 15% per year for the next 5 years. If you currently sell 3 million i-phones in one year, how many phones do you ex

Solutions to agency problem, Solutions to agency problem The bondholde...

Solutions to agency problem The bondholders might receive the following procedures to protect themselves from the process of the shareholders that might dilute the value of th

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd