Which of the following statements regarding projects with no IRR or multiple IRRs is true?
A)Projects with no IRR should always be rejected since they offer no return.
B)A project with multiple IRRs should be accepted as long as at least one of the IRRs exceeds the cost of capital.
C)A project with multiple IRRs should be accepted so long as all of the IRRs exceed the cost of capital.
D)None of the above statements is true.

Question

Quizplus · Accepted Answer

A project with no IRR doesn't mean that it offers no return, it means that the project's cash flows do not contain a single value for IRR, which makes it difficult to evaluate. However, other methods such as NPV can still be used to evaluate the project. 
A project with multiple IRRs can be misleading since it implies that the project could have more than one rate of return, which is theoretically impossible. Therefore, it is best to avoid such projects or use other methods such as MIRR to evaluate them. Projects with no IRR or multiple IRRs can still be evaluated using other methods such as net present value (NPV) or profitability index (PI). The decision to accept or reject a project should be based on whether the NPV or PI is positive or greater than 1, respectively. Multiple IRRs can also lead to ambiguous decision-making and should not be solely relied upon. Therefore, none of the above statements are true.

Which of the Following Statements Regarding Projects with No IRR