Free PMI Project Management Professional (PMP) Practice Question

The statement is true. The Internal Rate of Return (IRR) is a project selection method that does consider the time value of money. IRR calculates the discount rate at which the net present value of all cash flows from a project equals zero. By discounting future cash flows to their present value, IRR inherently accounts for the time value of money. This makes IRR a useful tool for comparing projects with different cash flow patterns over time, as it provides a percentage return that can be easily compared across projects of varying sizes and durations. However, it's important to note that while IRR is valuable, it should be used in conjunction with other methods like Net Present Value (NPV) for a comprehensive project evaluation, as IRR has limitations in certain scenarios, such as when dealing with non-conventional cash flows or mutually exclusive projects.