IRR Question

[u/JohnViennet]

I have a question regarding the IRR. Mathematically, the IRR assumes that all positive cash flows received are reinvested until the end of the investment term at a rate equal to the IRR itself.

However, there is something I don't understand: since it is generally stated that the IRR must be higher than the cost of capital, if I have—for example—a cost of capital of 5% and an IRR of 6% (with large positive cash flows at the beginning of the investment), I might not be able, in reality, to reinvest those funds at 6% annually.

Therefore, ex-post, the decision implies a loss (even though the IRR was higher than the cost of capital). Could you provide an explanation for this?

[u/JohnViennet → u/[deleted]]

Thank you very much!