A project will have only one internal rate of return if:
A) The net present value is positive
B) The net present value is negative
C) The cash flows decline over the life of the project
D) There is a one sign change in the cash flows

Question

Quizplus · Accepted Answer

A project will have only one internal rate of return if there is only one sign change in the cash flows. If there are multiple sign changes, there can be multiple IRRs, and if there are no sign changes, there is no IRR. The net present value being positive or negative does not determine the presence or absence of multiple IRRs. The cash flows declining over the life of the project also does not affect the presence of multiple IRRs.

A Project Will Have Only One Internal Rate of Return