alleryStart learning →Why is IRR often too optimistic compared with MIRR?
AIt assumes inflows earn the IRR itself
BIt ignores the initial outlay
CIt ignores the time value of money
DIt uses book profit instead of cash
Answer & Solution
Correct answer: A. It assumes inflows earn the IRR itself
A realistic reinvestment rate is closer to the cost of capital, which is usually lower than a high project IRR.
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Related questions
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