Choice "d" is correct. The internal rate of return (IRR) method is less reliable than the net present

value (NPV) technique when there are several alternating periods of net cash inflows and net cash

outflows or the amounts of cash flows differ significantly. The IRR is strictly a percentage measure of

return, while the NPV is an absolute measure. Due to this difference, the timing or amount of cash

flows under IRR can be misleading when compared to the NPV method.

Example: If an investment of $50 earns $100. Then, 100/50 = 200% return

If an investment of $50,000 earns $25,000 then, 25,000/50,000 = 50% return

IRR suggests it is best to invest $50 to earn $100 and a 200% return while the NPV method will

indicate a larger NPV for the $50,000 investment.

Choices "a", "b", and "c" are incorrect. These conditions do not make the IRR method less reliable

than the NPV method.