Which of the following statements is CORRECT?
A) For a project to have more than one IRR,then both IRRs must be greater than the WACC.
B) If two projects are mutually exclusive,then they are likely to have multiple IRRs.
C) If a project is independent,then it cannot have multiple IRRs.
D) Multiple IRRs can occur only if the signs of the cash flows change more than once.
E) If a project has two IRRs,then the smaller one is the one that is most relevant,and it should be accepted and relied upon.

Question

Quizplus · Accepted Answer

Multiple Internal Rate of Returns (IRRs) can occur when a project's cash flow stream changes signs more than once (i.e., from positive to negative and back to positive or vice versa). This situation can lead to the calculation of more than one IRR, making it difficult to apply the IRR rule straightforwardly.

Which of the Following Statements Is CORRECT