How many possible IRRs could you find for the following set of cash flows?

A)1
B)2
C)3

Question

How many possible IRRs could you find for the following set of cash flows?

A)1 
B)2 
C)3

Quizplus · Accepted Answer

There can be at most two possible IRRs for a set of cash flows where there is an initial outflow followed by a series of inflows, or vice versa. This is because the IRR equation is a polynomial equation of degree "n" where "n" is the number of cash flows. In this case, the cash flows are all positive, so there is no initial outflow, which means there can be at most one positive IRR. However, since the cash flows change sign twice, there could be two possible IRRs.

How Many Possible IRRs Could You Find for the Following