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Excellent lectures John, thanks.
Question: Is it possible for one investment to have 2 IRRs?
If yes explain please.Yes it is. There is potentially one IRR for every change of sign in the cash flows.
So for example, if the cash flows are:
0 (10,000)
1 20,000
3 (8,000)The flows change from negative to positive, and then from positive to negative, so 2 changes of sign and therefore possibly (but not necessarily) two IRR’s.
However you could not be expected to calculate the IRR’s in this case in the exam.
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