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hello sir , this question is from kaplan kit
A company is considering a project which has an initial outflow followed by several years of
cash inflows, with a cash outflow in the final year.
How many internal rates of return could there be for this project?
A Either zero or two
B Either one or two
C Zero, one or two
D Only twoans is C
sir can you please explain e this statement , why are their more than one IRR or zero IRR what does that mean?
I explain this in my free lectures!!
For every change of sign in the cash flows there is potentially (but not necessarily) one more IRR. Here the cash flows change from negative to positive and then to negative again – so two changes of sign and therefore potentially up to two IRR’s. You cannot be expected to calculate the IRR’s if there is more than one, but you can be expected to be aware of the possibility.
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