Over time, you might come across a project with both negative and positive cash flows. When IRR is used, it gives multiple answers, thus leading to poor decisions. IRR does not take into account the cost of capital, so it becomes difficult to compare projects/investments over a specified duration. The IRR overestimates the corresponding annual rate of return for projects whose short-term cash flows are reinvested at a rate lower than the calculated IRR, leading to poor results.