If the NPV (Net Present Value)of a project with multiple sign reversals is positive,then the project's required rate of return ________ its calculated IRR (Internal Rate of Return).
A)must be less than
B)must be greater than
C)could be greater or less than
D)cannot be determined without actual cash flows

Question

Quizplus · Accepted Answer

When a project has multiple sign reversals, it means that the cash flows change from positive to negative and vice versa. The multiple sign reversals can result in multiple IRRs, making it difficult to determine the actual IRR accurately. Therefore, in such cases, the NPV method is more appropriate for evaluating the project. If the NPV is positive, it means that the project is generating a return higher than the required rate of return. However, the calculated IRR may not be the actual rate of return required by the project, and it could be either higher or lower than the required rate of return. Therefore, option C is the most appropriate answer.

If the NPV (Net Present Value)of a Project with Multiple