Project invisibility can lead to sub-optimal results when IRR (Internal Rate of Return) is used for capital rationing, especially when comparing projects of different sizes or with mutually exclusive projects, because IRR does not measure the true creation of wealth or absolute value, unlike Net Present Value (NPV). Projects with a high IRR may appear attractive, but their actual wealth creation, or the absolute increase in shareholder value, is not captured by IRR alone, leading to poor capital allocation decisions under capital constraints.
Project invisibility can lead to sub-optimal results when ______ is used for capital retaining.
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