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A significant disadvantage of the internal rate of return is that it may have an unrealistic...

A significant disadvantage of the internal rate of return is that it

may have an unrealistic reinvestment assumption.

does not give proper weight to all cash flows.

does not fully consider the time value of money.

It is expressed as a percentage.
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Answer #1

Answer is “may have an unrealistic reinvestment assumption”

Internal rate of return assumes that cash flows are reinvested at internal rate of return. It may be not possible for a firm to earn a higher rate of return than the market rate of return.

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