The limitations of using IRR in capital budgeting include: it assumes that the cash flows are reinvested at the IRR itself, which may not always be the case; it may give multiple values for projects with alternating cash flows; it does not consider the size of the project, so a project with a higher IRR but smaller size may be chosen over a larger project with a slightly lower IRR; and it does not consider the risk of future cash flows.
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