The problem of multiple IRRs can occur when:
A)there is only one sign change in the cash ﬂows.
B)the ﬁrst cash ﬂow is always positive.
C)the cash ﬂows decline over the life of the project.
D)there is more than one sign change in the cash ﬂows.
E)None of the above.

Question

Quizplus · Accepted Answer

The problem of multiple IRRs occurs when there is more than one sign change in the cash flows. This can result in multiple possible discount rates at which the net present value of the project is zero, and therefore multiple potential IRRs.

The Problem of Multiple IRRs Can Occur When