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IRR

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › IRR

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • October 23, 2021 at 6:17 pm #638933
    sadafwaheed1
    Member
    • Topics: 79
    • Replies: 29
    • ☆☆

    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 two

    ans is C

    sir can you please explain e this statement , why are their more than one IRR or zero IRR what does that mean?

    October 24, 2021 at 2:35 pm #638986
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51585
    • ☆☆☆☆☆

    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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