The Advantages & Disadvantages, IRR Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -16

8.1           THE ADVANATAGES & DISADVANTAGES, IRR METHOD

• Internal profitability rate method, the investment projects that consider account the time value of money is a dynamic method. For the reason that IRR do not have the drawbacks as the static methods in this direction.
• The IRR is a method, which evaluate the time factor and the useful life at the investment projects. In addition, it estimates that the cash outflows and inflows provided the investment are compared each other by reducing at the same time level by IRR method.
• One of the other features of this method is to help to decide the rational investment especially in high inflation rates countries.
• The reason for that It includes the all investment expenditures and the all useful life of the investment incomes, it helps to get more healthy decisions.
• Sometimes, Internal rate of return method helps to prefer the projects, which have the useful life of the investment projects in a short but high profitability rate in spite of long useful life, whereas a lower rate of return.
• Years as the investment income is provided by the continuous cases, there is no problem in the calculation of internal rate of return.
• However, as some situations that there is no income and only cash-out at certain times, serious difficulties can be encountered to calculate the IRR, in some cases may not be possible to calculate the internal rate of return.