Question：Which one of the following statements about the Internal Rate of Return is not true?
A. IRR should not be used to decide between mutually exclusive projects.
B. IRR should not be used when cash flows from a project do not follow a conventional pattern of an outflow followed by inflows.
C. The IRR is the discount rate at which the NPV of a project is zero.
D. A project should be selected as long as the IRR is not less than the cost of capital.
The correct answer is:IRR should not be used when cash flows from a project do not follow a conventional pattern of an outflow followed by inflows.
IRR can be used when project cash flows do not follow a conventional pattern. In these circumstances, there may be more than one IRR and so interpretation may be less straightforward than if there is a single IRR.
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