The main advantage of the internal rate of return (IRR) method in capital budgeting is that it adjusts for the time value of money.

Time Value of Money:
The time value of money is a fundamental concept in finance that recognizes the fact that the value of money changes over time. Money received in the future is worth less than the same amount received today due to factors such as inflation and the potential to earn interest or returns on investments. Therefore, it is important to consider the time value of money when evaluating investment projects.

Explanation of the IRR Method:
The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of an investment project is equal to zero. In other words, it is the rate of return that equates the present value of cash inflows with the present value of cash outflows. The IRR is a measure of the profitability and efficiency of an investment project.

Advantages of the IRR Method:

1. Adjusts for the Time Value of Money:
The IRR method takes into account the time value of money by discounting future cash flows back to their present value. This allows for a more accurate assessment of the project's profitability. By considering the timing of cash flows, the IRR method provides a better understanding of the project's potential returns compared to methods that do not adjust for the time value of money.

2. Considers all Cash Inflows after the Payback Period:
Unlike the payback period method, which only considers the time it takes to recover the initial investment, the IRR method considers all cash inflows throughout the project's life. This means that the IRR method takes into account the entire cash flow stream of the project, providing a more comprehensive evaluation.

3. Provides a Measure of Financial Viability:
The IRR method provides a measure of financial viability by comparing the project's IRR with the required rate of return or cost of capital. If the IRR is higher than the required rate of return, the project is considered financially viable. This allows managers to make informed decisions about whether to proceed with an investment project.

Conclusion:
The main advantage of the IRR method in capital budgeting is its ability to adjust for the time value of money. By discounting future cash flows and considering the entire cash flow stream, the IRR method provides a more accurate measure of the project's profitability and financial viability.