A necessary condition for multiple internal rates of return is that one or more of the net cash flows in the later years of a project's life must:
A)be positive.
B)be negative.
C)exceed the required rate of return.
D)be greater than the initial outlay.

Question

Quizplus · Accepted Answer

Multiple internal rates of return occur when there are multiple sign changes in the cash flows. This means that there must be at least one period where the net cash flow is negative. Therefore, option B is the correct choice. Option A, C, and D are incorrect as they do not necessarily lead to multiple internal rates of return.

A Necessary Condition for Multiple Internal Rates of Return Is