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Dear Tutor,
One of the questions from the Mock exam asks which is not a weaknesses of IRR. Can you please help me why the statement below is not a weakness:
It cannot reliably be used as a basis for choosing between investments.
Thank you
But the questions asks which is not a weakness, and this is one of the correct questions according to the answer (besides: There can be several IRR’s for the same investment).
Sorry – ignore my previous reply.
Although it is true that there can be several IRR’s and that it cannot reliably be used as a basis for choosing between investments, they are not weaknesses of the IRR itself – they are problems with how the IRR is used. There is a subtle difference in the wording.
Thank you very much for your help.
I think I’ll have to guess if such a question comes in the exam 🙂
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