Given a particular set of project cash flows, which one of the following statements must be correct?
A) There can be only one NPV for the project, even with multiple discount rates.
B) There can be only one IRR for the project.
C) There can be more than one IRR for the project.
D)There can be only one profitability index for the project, even with multiple discount rates.

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) can indeed have multiple values for a project, especially in cases where the project has alternating cash flows (i.e., cash flows switch from positive to negative or vice versa multiple times over the project's life). This can lead to a project having more than one IRR due to the mathematical nature of the IRR calculation, which involves solving a polynomial equation that can have multiple roots.

Given a Particular Set of Project Cash Flows, Which One