If a project has multiple internal rates of return,the lowest rate should be used for decision-making purposes.

Question

Quizplus · Accepted Answer

If a project has multiple internal rates of return, it indicates that the cash flows are changing signs more than once, resulting in no one clear rate of return. Therefore, using the lowest rate of return would not be appropriate for decision-making as it may not accurately reflect the project's profitability. In such cases, other factors such as net present value and payback period should also be considered to make an informed decision.

If a Project Has Multiple Internal Rates of Return,the Lowest